When looking for car insurance, one of the first things you may ask for is full coverage. It’s a standard ask for drivers concerned with protecting their cars. You want to know that you are protected, whether you hit a deer, guardrail, or other driver. If you pull out your insurance policy and review your declarations page, you may see coverage listed that is surprising. Full coverage is not listed.
That is because full coverage does not exist in the insurance world. It is a term that marketers use to describe a bundle of coverages. Each coverage operates independently to protect you, your passengers, and the car. This is an important distinction because assuming you have full coverage is not a guarantee that protections are in place or that you have the most valuable coverages.
Auto premium options can be complex and adjusting them can mean the difference between a small loss and a large loss. This guide will explain the concepts and terminology of insurance and assist in explaining what a good insurance package is, who needs it, and how to get a package that is not overpriced and that will insure you for protection that is valid.
A full coverage package includes Liability, Collision, and Comprehensive insurance. When agents and lenders refer to full coverage, that is the package of insurance that is offered. Driving is only legal when you have liability coverage, and that is the only mandatory coverage there is. However, that means that your car is not covered in the event of an accident. The full protection that most drivers want is to have all three of these policies active.
Legal Minimum: Liability Coverage
For an insurance policy to be valid, it must include some level of liability coverage. Liability insurance protects you from the financial repercussions of causing an accident that injures someone, or that damages someone’s property. Liability insurance also does not cover the injuries you sustain, or the damages to your car. Liability coverage is divined into two parts:
Bodily Injury Liability: This covers the damages caused by the injuries, as well as the other costs associated with injuries to a person, including the person’s medical expenses, the person’s lost income, and the attorney’s fees. Coverage is typically divided into two parts relative to the person injured and the accident. For example, a policy with a limit of 50/ 100 will cover up to $50,000 for the medical expenses of an individual and will cover $100,000 in total in an accident for injuries of all people.
Property Damage Liability: This covers the financial costs of repairing or the replacing of the property that you have damaged, e.g a car owned by another driver, a fence owned by a neighbor, or a utility pole owned by the city.
Coverage Types: In Detail
Collision insurance provides a starting point for full coverage policies. With this insurance, repairs or replacements to your vehicle would be paid for after a collision, regardless of the cause. Whether it’s a crash with a vehicle or an object, repairs would be made after a minor collision or accident. A customer would still owe a deductible, but coverage would be in effect regardless of fault. If you rear end a car at a stoplight, or accidently back into a concrete wall, your repairs would be paid for. If you have to cause an accident, without this coverage, you would be responsible for all of the repairs. If your vehicle gets totaled, you would receive absolutely nothing in return. This would leave you with a vehicle void of all of its financing, in the event that you have a car loan.
Insurance is multifaceted. Comprehensive insurance covers the more unusual occasions, or as they say, ‘other-than-collision’ occurrences. This takes the out of your control factors, like damage to your wallet concerning: Thefts, vandalism like your car being keyed, destruction by weather including hail, floods, and branches.
Comprehensive covers protection on a myriad of non-collision scenarios in the out of control factor. In addition to the more typical policies, insurance is furthermore more multifaceted and covers uncommon incidents.
Animal Strikes: Running into a deer or any other animal is classified as a comprehensive claim, not a collision claim.
Glass Damage: Getting a cracked windshield from a rock on the highway.
The Additional Options
While Liability, Collision, and Comprehensive represent the minimum policy requirements to achieve full coverage, additional protections may be presumed to be included, but are not included. To fully secure your policy, you may need to request these:
Uninsured/Underinsured Motorist Coverage: Covers you when you are struck by a driver that has no coverage, or has insufficient coverage to pay for your damages.
GAP Insurance: Important for new cars, it covers the “gap” between what you owe on your loan and the car’s depreciated value if it is totaled.
Rental Reimbursement: Covers the cost of a rental car when yours is in the shop for covered repairs.
Roadside Assistance: Covers towing, tire changes, and jump-starts.
The Major Benefits of Full Coverage
Choosing more than the state-required minimums is protecting your financial peace of mind. While the monthly premiums are higher, the comprehensive and collision coverage are going to be a benefit to you in the long run.
Complete Financial Protection
If you are concerned about protecting your assets, it makes sense to consider complete financial protection. Cars are expensive. Just a small accident with a fender bender can cost you $3,000 for bodywork or sensor repairs. A complete loss could cost you over $10,000. If you have only liability insurance, you are fully self-insuring your car. With full coverage, you transfer that financial risk from your bank to the insurance company.
The Insurance Company Fights For You
If you are in an accident, you have insurance to pay for bills, and liability insurance to ensure that protection on the other side exists. That peace of mind means you are able to ignore the accident scenario. You are free to drive without the risk of consequences, as the insurance collides on the other side.
Meeting Lender Requirements
If you finance or lease your vehicle, you usually won’t have a choice. Lenders and leasing companies own the asset until you pay it off, so they must require you to carry full coverage. Dropping this coverage before the loan is paid off will cause the lender to place “force-placed insurance” on you. This insurance is much more expensive and offers less protection than a policy you would purchase yourself.
When is full coverage suggested?
The absence of full coverage insurance can be fine, but in some instances, having full coverage insurance can be a requirement, especially with leases and loans.
In some instances, having full coverage insurance can be a requirement, especially with leases and loans. With a loan or lease, it is almost always required.
Your vehicle should have value or it should be a new vehicle. If your vehicle is valued more than $5,000 to $10,000 and you have an insurance policy that is under $5,000, it can be a risk to pay out of your own pocket to replace the vehicle.
You focus on saving for your insurance: Your car does not need to be new to ask yourself, “If this car was totaled, could I buy it back with cash?” If the answer is no, then insurance is necessary.
You live in a high-risk area: If your neighborhood experiences high vandalism, theft, or severe storming (including hail or flash flooding) then necessary coverages includes theft, vandalism, or storm damage insurance.
When to Consider Dropping It
Most winds and streets consider this the 10% Rule. If your annual costs for both comprehensive and collisional coverages go over 10% of your car’s cash value, then it is time to consider liability coverage along.
Let’s say you have an older sedan that costs about $2,000 and your full coverage costs around $800 a year, then you are paying way too much for insurance. If you have a total loss, you would only receive $2,000 minus your deductible which could be $500, and you would be left with only $1,500. If this was your case, then keeping the $800 you would be paying for coverage would be your best financial choice.
Key Factors Influencing Your Premium Costs.
Most individuals looking for insurance coverage ask for quotes from multiple companies to take advantage of the lowest coverages available. However, while insuring an individual is similar to insuring another, the price may be wildly different. Insurance companies employ advanced computing and multivariate processes to calculate the best premium for an individual.
Personal Factors
Driving History: Staying accident and ticket free is the best way to improve or maintain low rates. Accidents, DUIs, and other violations cause an individual to be categorized as a high risk driver exponentially raising their premiums.
Age: Statistics show that the higher the driver’s age, the lower the risk. Therefore, a driver who is a teen or a driver in their low to mid-twenties is more likely to be involved in an accident in comparison to those who are older. Rates tend to alleviate and are more forgiving after an individual reaches their mid-twenties.
Credit Scores: Driving scores and premiums are very closely tied to an individual’s credit history in more states than one. Statistically, individuals with lower credit history are more likely to file for insurance claims after an accident and as a result raise premiums for all those who fall in a similar situation to them.
Vehicle Factors
Repair Costs: Vehicles that are imported and include multiple advanced technologies such as sonar and adaptive cruise control, tend to be more expensive to insure than vehicles that are more basic.
Safety Scores: Vehicles equipped with advanced driver assist technologies carry the potential for discounted premiums and are more affordable to insure.
Theft Rates: If a vehicle is known to be stolen frequently, comprehensive premiums tend to be more expensive to cover.Your Location
Due to the localized nature of insurance, urban drivers tend to pay more than rural drivers for insurance due to higher incidents of vandalism, theft, and fender benders. Additionally, if you live along the coast and are prone to hurricanes or live in an area known for hail storms, expect to pay more in comprehensive coverage.
How to Compare Quotes and Save
When shopping for full coverage, it is important to take an “apples-to-apples” approach. Liability limits and deductibles must be the same or else you’re looking at different levels of coverage, and a quote may look cheaper than others just by offering less protection.
Consider the Deductibles
A deductible is an out-of-pocket amount you agreed to pay before your insurance coverage kicks in. Deductibles can range anywhere from $500 or $1,000. Raising your deductible to $1,000 from $500 can lower your insurance premium significantly. Just be sure that in the event you have to pay a deductible, you have the $1,000.
Discounts Do Not Buy Themselves
The discounts are just waiting to be claimed, are reductions of your monthly premium that most insurance providers will keep to themselves. Claiming a bundling discount is most common, where the consumer combines auto and renters/home insurance. The telematics discount is also very common, in which the consumer opts to cover a little device or app that evaluates their driving habits and rewards safe driving.
Good Student: High school or college student drivers receive a good student discount if they maintain a B average or higher.
Pay-in-Full: Make a one-time payment for the six-month premium instead of paying monthly.
Understanding the Claims Process Having full coverage insurance is only beneficial if you know how to use it. If a car accident occurs, knowing the proper steps can help get the process to a close faster, increasing your chances of a more timely payment.
The National Association of Insurance Commissioners (NAIC) emphasizes that your first priority should always be safety. After ensuring that everyone is okay and calling the police if there are any injuries, you should move your car out of the way of traffic if it is still operational.
The Importance of Documentation Before you leave the accident scene, be sure to document everything you can. Make sure to get the name, address, and insurance policy number of the other driver. If the other driver is not willing to cooperate, write down their license plate number. Use your camera to take pictures of the of all damage that occurred to the cars, the location of the cars on the street, the position and distances of the cars, any other damage (scratches, etc.), tire skid marks, and any other pertinent street signage, road conditions, and weather.
Filing a Claim
Many insurance companies have mobile apps that allow you to file a claim and upload pictures while at the accident scene. To assess the damages and determine payment, a claims adjuster will be assigned to your case.
Under full coverage, your insurer will pay either you or the body shop for repairs if your car can be fixed, and you pay your deductible. If the repairs are more costly than the car’s value (or a state law determined percentage), your car will be considered a “total loss.” You will then be compensated for the car’s actual cash value prior to the accident.
Is Full Coverage Worth It?
“Full coverage” means you will be financially protected to drive over a patch of black ice, and it won’t derail your financial life. The name implies that the coverage offers more than it does but the financial protection is very real.For many drivers—particularly those who own new cars, or who commute daily and depend on their cars—building an insurance policy that includes liability, collision, and comprehensive coverage is the most prudent option. Most drivers need to spend some time evaluating their policy limits, adjusting deductibles to match their savings, and figuring out how to offer the most value for their coverage to avoid losing money.