Liability vs Full Coverage Car Insurance: Which Is Right for Me?
When you’re shopping for the right car insurance – something that’s a legal requirement in most areas when you own a car – one of the biggest questions that comes your way is whether or not you should have liability (or minimum) coverage or a full coverage policy on your car. Liability insurance is usually cheaper, but a full coverage policy will cover more. Which is the right answer?
The answer is: it depends. Overall, the average national insurance cost is $1,502 per year, so you can expect to pay a higher rate if you prefer full coverage or a little bit less if you’d rather just have liability insurance.
In this post, we’ll outline the differences between the two types of policies and help you determine which kind is right for you.
What is covered with liability insurance?
Liability coverage does not cover any damage to your own vehicle in the case of an accident. What it does cover is any damage done to other vehicles that you’re legally obligated to cover.
For example, if you’re in a traffic accident where you’re at fault and you damage another car, liability insurance kicks in. Liability coverage doesn’t typically have a deductible, meaning that if you have to use the insurance, nothing will come out of your pocket.
What is covered on a full coverage policy?
A full coverage car insurance policy typically includes collision and comprehensive coverage. Collision coverage is used to cover damage to your own vehicle when you are involved in an at-fault accident. Comprehensive coverage covers the damage done to other vehicles, but it also combines with collision coverage to cover damage done to your own vehicle, not just from traffic accidents, but from many natural sources. If your car is damaged in a storm, for example, comprehensive coverage kicks in.
When you make a claim on comprehensive insurance, however, there is usually a deductible, meaning you have to pay for some of the damage out of pocket (broken windshields are often an exception). Remember, though, that liability coverage is usually a part of comprehensive insurance – you get the liability coverage described above, along with the coverage of your own vehicle.
Who should get liability coverage?
In general, the older your car, the more likely it is that you can just get by with the cheaper liability insurance. Liability insurance only covers damage to the other driver’s car in an accident that’s your fault (if you’re not at fault, the other driver’s insurance will pay for damages).
So who should get liability coverage? Here are some examples of people who would benefit from it:
- An 18-year-old teen who’s driving his father’s hand-me-down, ten-year-old Ford Fiesta. It doesn’t make sense to have full coverage on a car that old, when the repairs if he was in an accident would likely cost more than the car is worth.
- A family with a second car, a Honda Civic, that’s eight years old, that they just use around town. Their main car, which is two years old, has comprehensive coverage, but it would be a waste of money to have it on the second one.
- Someone who is on a very tight budget, and wants to save as much money as possible to trade in their 11-year-old Volvo on a newer car. If they are a careful driver, and are able to put aside the money they’re saving on insurance toward the new vehicle, they can probably get by with minimum liability.
Other factors that you’ll want to keep in mind when deciding if you should just have liability include how often you drive, where you live and if your car is kept primarily in a garage. If you don’t drive often and keep your car off the street, you’re less likely to have an accident. And if you live in a safe neighborhood where your car is unlikely to be vandalized or damaged in any way, you’re not as likely to need comprehensive coverage.
Who should get comprehensive coverage?
Comprehensive coverage is insurance that covers additional elements that aren’t covered by liability. Mainly, it provides coverage for your own car in the case of an accident. It’s optional, but may be a good idea for you.
So who should get comprehensive coverage? Here are some examples of people who would benefit from it:
- Let’s say you just got your first brand-new car, after driving around a junker since you got your license. You want to protect your investment as much as possible, right? If that’s the case, you’ll want to pay the extra cost to have comprehensive coverage so that if your car is in any sort of accident, even if it’s just a one-car slide into a fence post during an ice storm, you’ll be covered.
- Or if you have a car of fairly high value, such as a sports car or top-of-the-line SUV. Once again, you want to know that you’ve got coverage that will pay out enough on a claim that you can repair the car to a like-new state in the case of a mishap, because repairs for this kind of car will be expensive.
- Comprehensive insurance is also a good idea if you drive extensively — perhaps you travel a great deal or drive for your job using your own car. The more you drive, the more you are at risk of an accident, and comprehensive coverage may be a good choice for you.
If you’ve spent a considerable amount of money to purchase a decent car, you probably don’t want to have to buy another car again in the near future. If it would be financially impossible for you to afford another car if your current car is damaged, full coverage insurance is the way to go.
The cost of minimum and full coverage car insurance
Obviously, the monthly cost for liability coverage is going to be less than the monthly cost of a full coverage policy. So, the real question is whether or not the additional benefits of the extra coverage are worth it.
For me, the question comes down to this: If your car were completely totaled, could you afford to pay off any remaining debt on it out of pocket as well as buy yourself a comparable car to replace it?
If you think about that question for a bit, it becomes pretty clear that liability works best in some cases and full coverage insurance works best in other cases.
Depending on the level of coverage you need, your rate can vary greatly. Typically, upgrading from liability-only insurance to full coverage will add on an additional $851 per year. Check out the average rates of full-coverage premiums versus liability-only rates from The Zebra in the table below.
|Company||Full-Coverage Premium||Liability-Only Premium|
If I am on a budget should I consider liability or comprehensive insurance?
The easy answer to this question is “liability,” because your premium payments will be lower with liability than they would be with full coverage insurance. But ask yourself: if my car is in an accident, can I afford to get it repaired or buy a new one without relying on insurance?
If the answer is “no,” it may be worth considering the extra expense for comprehensive insurance so that you would be covered for repairs in the event of an accident. Remember: even safe drivers sometimes have accidents, and the more you drive, the more likely you are to be in one.
So in the end, if you go with liability, you’re taking a gamble that you won’t have an accident that would put you in the red because you needed expensive repairs or even a new car if your old one is totaled. Only you can decide which option is best for you.
What is covered with liability insurance?
Liability coverage is fairly simple. Here is what you should know about it:
- It covers damage to the other car(s) if you are in a two- or multiple-car accident and you are determined to be at fault
- It never covers damage to your own car
- It has no deductible, so you shouldn’t have to pay anything out of pocket, but be aware that your rates may go up following an accident
What is covered on a full coverage policy?
A full coverage policy is a bit more complex. Here are the details you need to know:
- It includes collision insurance, which covers damage to your own vehicle when you’re in an at-fault accident
- It also includes comprehensive insurance, which covers damage to your own car from anything other than a car accident, from storm damage to theft to a roll-over on an icy road
- It does have a deductible, so you’ll have to pay the amount you chose as a deductible when you purchased your policy before the insurance kicks in