What Is Considered Full Coverage Auto Insurance?

When people talk about "full coverage" car insurance, they're often referring to a combination of coverages that help protect a vehicle. But, there's really no such thing as "full coverage" for your car.

What most drivers and insurance agents refer to as full coverage is a car insurance policy that includes state-mandated car insurance coverages (this usually is bodily injury liability and property damage liability but also may include uninsured motorist and personal injury protection), along with physical damage coverages of collision and comprehensive.

Some coverages (such as auto liability) are required by state law. Others (such as rental reimbursement) may be optional, depending on the insurer and your situation. So, it's up to you to choose car insurance that fits your needs — making sure your coverage meets state requirements and helps you protect your car.

Insurance is meant to protect you from being sued, or left financially stranded by a totaled car, or ruined by an uninsured driver. That doesn't mean an accident won't leave you with expenses and hassles you wouldn't face otherwise.

Full coverage is shorthand for policies that cover not only your liability but damage to your car as well. Here's how to weigh liability vs. full coverage.

What is full coverage?

To most drivers, “full coverage” means you have bought not only liability insurance – which is mandatory virtually everywhere and pays for the damage you inflict on other people and property – but comprehensive and collision, too.

Ideally, full coverage means you have insurance in the types and amounts that are appropriate for your income, assets and risk profile. The point of all types of car insurance is to keep you from being financially ruined by an accident or incident.

Of course, you can buy a policy with every conceivable option:

  • The highest available liability limits (usually $250,000 per person bodily injury, $500,000 per accident, $100,000 property damage)
  • The lowest possible deductible on collision and comprehensive coverage. At some companies, it's $0, but $100 and $250 are common.
  • Uninsured motorist coverage
    • Uninsured/underinsured motorist bodily injury coverage with limits matching your liability coverage
    • Uninsured motorist property damage (not available in all states)
  • All available medical coverages in the highest amounts possible (personal injury protection in no-fault states and medical payments coverage in most others)
  • Rental reimbursement coverage
  • Towing and labor
  • Preferred-customer add-ons such as new car replacement programs or vanishing deductibles

In reality, there is no policy that will cover you and your car in every situation, just most of them.

Full Coverage Auto Insurance

Many think they carry “full coverage" on their car insurance policy; however, in reality there is no such thing as full coverage auto insurance.

A full coverage policy is typically one that includes several types of car insurance coverage that, as a whole, provide a solid level of protection in case of an accident.

What Does “Full Coverage" Mean?

While there is no car insurance coverage that goes by the name “full coverage," most individuals think of full coverage as a policy that combines the following:

  • State-required liability or no-fault insurance coverage to cover bodily injury and property damages to others in an accident you cause.
  • Collision coverage to pay for damages to your vehicle in the event of an accident.
  • Comprehensive coverage, which is designed to cover vandalism, theft, and other damages that are not the result of an accident.

Even with this, the details and amount of protection will vary by the company issuing the policy. You need to ask about the details and read the fine print carefully.

What does full coverage insurance cover

A typical full coverage policy (liability, comprehensive and collision, uninsured motorist and medical coverage) should cover:

  • The damage you do to others, up to your liability limits.
  • Your car, up to its fair market value, minus your deductible, if you are at fault or the other driver does not have insurance or if it is destroyed by a natural disaster or stolen.
  • Your injuries and those of your passengers, if you are at fault, up to the amount of your medical coverage.
  • Your injuries and yours of your passengers, if you are hit by an uninsured motorist, up to the limits of your uninsured motorist policy.

Typical full coverage insurance won't pay for:

  • Racing or other speed contests
  • Off-road use
  • Use in a car-sharing program
  • Catastrophes such as war or nuclear contamination
  • Destruction or confiscation by government or civil authorities
  • Using your vehicle for livery or delivery purposes; business use
  • Intentional damage

Typical comprehensive and collision policies won’t cover:

  • Freezing
  • Wear and tear
  • Mechanical breakdown (often an optional coverage)
  • Tire damage
  • Items stolen from the car (those may be covered by your homeowners or renters policy, if you have one)
  • A rental car while your own is being repaired (an optional coverage)
  • Electronics that aren’t permanently attached
  • Custom parts and equipment (some small amount may be specified in the policy, but you can usually add a rider for higher amounts)

 

How much does full coverage cost?

Car insurance rates are very specific to the person who owns the car: Your age, driving record, credit history and location count as much as the kind of car you are driving. Rates also vary by hundreds of dollars from company to company. That's why we always suggest, as your first step to saving money, that you compare quotes.

Here's a comparison of the average yearly cost of the following coverage levels, by state:

  • State-mandated minimum liability, or, bare-bones coverage needed to legally drive a car
  • Liability coverage of $50,000 for those injured in an accident you cause, up to $300,000 per accident, and $50,000 for property damage you cause
  • Full coverage liability of $100,000 per person injured in an accident you cause, up to $300,000 per accident, and $100,000 for property damage you cause, with a $1,000 deductible for comprehensive and collision
  • Full coverage iability of $100,000 per person injured in an accident you cause, up to $300,000 per accident, and $100,000 for property damage you cause, with a $500 deductible for comprehensive and collision
  • Full coverage liability of $100,000 per person in an accident you cause, up to $300,000 per accident, and $100,000 for property damage you cause, with a $250 deductible for comprehensive and collision  

Additional Coverages to Consider

Having a full coverage auto insurance policy doesn't mean you have full protection no matter what. Depending on your circumstances, it may even mean you don't even have good enough protection. Instead of relying on a “full coverage" policy, ask yourself what coverage and limits best meet your needs.

There are numerous other types of car insurance coverage that will offer you additional protection in case of an accident or other unfortunate situation.

Consider adding one or more of the following insurance coverages to your policy if you are looking for a very comprehensive car insurance policy:

  • Uninsured motorist protection – This helps you cover your costs if you get hit by a driver with no insurance.
  • Underinsured motorist protection – This will help pay your costs if the other driver has insufficient insurance coverage and/or coverage limits.
  • Medical payments coverage – You can use this coverage to pay for your medical costs after a car accident, even if you were at fault.
  • Rental reimbursement – If you're in an accident and your car is in repair, this coverage can cover your rental costs while you wait.
  • Emergency road service – You can use this coverage if your car breaks down on the road and you need towing or labor.
  • Customized parts and equipment – If you've enhanced your vehicle with expensive equipment, this coverage will help you with the cost of damages to your custom parts.
  • Gap insurance – If your car is totaled in an accident, this coverage helps pay the balance between the amount you owe on your loan or lease and the car's estimated actual cash value.

 

Do I need full coverage?

  • You are required to have liability insurance or some other proof of financial responsibility in every state. Coverage comes in varying levels, from the mandatory minimum to as much as $500,000. You as a car owner are on the hook personally for any injury or property damage beyond the limits you selected. Your insurance company won’t pay more than your limit.

    But liability coverage won't pay to repair or replace your car. If you owe money on your vehicle, your lender will require that you buy collision and comprehensive coverage to protect its investment. After you pay off the loan, the choice to buy comp and collision is yours alone.

    We have our own rules of thumb on insuring any car:

  • When the car is new and financed, you have to have full coverage. Keep your deductible manageable.
  • When the car is paid off, raise your deductible to match your available savings.
  • When you reach a point financially where you can replace your car without the assistance of insurance, seriously consider dropping comprehensive and collision.

LIABILITY COVERAGE

Liability coverage is typically included in all auto insurance policies, as it's required by law in most states. Bodily injury liability coverage helps pay for another person's medical expenses if you cause an accident. Property damage liability coverage helps pay for damage you cause to another person's property in a car accident.

Each state sets minimum liability coverage limits that drivers must purchase. Typically, the liability coverage in an auto insurance policy will contain three limits:

  • The maximum payment for bodily injury per person
  • The maximum payable for bodily injury per accident
  • The maximum payable for property damage

You may want to go beyond the state requirements and buy a policy with higher liability limits. Higher coverage limits typically mean you'll pay higher premiums, but you'll have more protection if you cause an accident.

COMPREHENSIVE AND COLLISION COVERAGE

If you are still paying off an auto loan or if you have a lease on your vehicle, your lienholder or financing company usually requires collision coverage and comprehensive coverage. Otherwise, if your vehicle is paid off, these two coverages are typically optional on a car insurance policy.

Collision coverage helps pay to repair or replace your vehicle if it's damaged in a collision with another vehicle or object (such as a fence). Remember, collision coverage helps protect your vehicle, while property damage liability helps pay for damage you cause to another driver's vehicle.

Comprehensive coverage helps pay to repair or replace your vehicle if it's stolen or damaged by things like hail, animal damage or vandalism.

Comprehensive and collision coverage each have deductibles and limits. A deductible is the amount you pay out of pocket toward a covered claim. A limit is the maximum amount your insurance will pay out for a covered claim.

RENTAL REIMBURSEMENT COVERAGE

Rental reimbursement coverage helps pay for a rental car while yours is being repaired after a covered loss. Be sure to check the coverage limits — typically, rental reimbursement pays up to a certain dollar amount per day, for a set number of days.

UNINSURED AND UNDERINSURED MOTORIST COVERAGE

Uninsured motorist coverage helps protect you against drivers without insurance. If you're injured in an accident caused by another driver, that driver's liability insurance will usually help cover medical expenses you incur — unless that driver doesn't have auto liability coverage. In that case, your uninsured motorist coverage would help pay for expenses related to your injuries.

Underinsured motorist coverage works similarly: It takes effect if the other driver who caused the accident has insurance, but their liability coverage limits are lower than the limits that trigger underinsured motorists coverage in your state. Check your state’s insurance requirements or ask your agent for more information about this coverage.

MEDICAL PAYMENTS COVERAGE/PERSONAL INJURY PROTECTION

Medical payments coverage helps pay for your (or your passengers') medical expenses after an accident, regardless of who is at fault. Covered expenses may include things like surgery or X-rays.

Personal injury protection (PIP) isn't available in all states, but it's required in some states. PIP works similarly to medical payments coverage — it helps cover your medical expenses resulting from a covered loss. In some cases, it may also help you pay for other expenses while you're healing. These expenses may include child care services and lost income as a result of your injuries.

When should I drop full coverage?

Our data show that 40 percent of drivers who own 10-year-old model cars are buying comprehensive and collision coverage. Many consider dropping these optional coverages on a car nearing the end of its life. If you can manage such a loss -- that is, replace a stolen or totaled car without a payout from insurance -- do the math on the potential savings.

For example, a 25-year-old woman with a clean driving record living in Stirling, N.J., would pay about $1,302 a year for “full coverage” (50/100/50 liability, uninsured motorist, personal injury protection and comprehensive and collision coverage with a $500 deductible) on a 10-year-old Ford Focus ZX4. Dropping comprehensive and collision, she would pay about $806 a year – a savings of $496 a year.

Let's say her car is worth $4,450 as the “actual cash value” an insurance company would pay. If her car were totaled tomorrow and she still carried full coverage, she would get a check for $3,950 – the actual cash value of the car minus her $500 deductible. In other words, she is paying $496 a year to protect herself against a $3,950 loss.

Of course, the value of the car drops with each passing year, and so do the insurance premiums. At a certain point, most drivers would choose to accept the risk and bank the collision and comprehensive premiums because they would be unlikely to find a reliable replacement with the insurance payout.

References:

[1] Full Coverage Car Insurance Rates By State https://www.insurance.com/auto-insurance/coverage/full-coverage.html#full1

[2] Full Coverage Auto Insurance https://www.dmv.org/insurance/full-coverage-auto-insurance.php

[3] What Is 'Full Coverage'? https://www.allstate.com/tr/car-insurance/what-is-full-coverage.aspx

[4] What is full coverage car insurance? https://www.carinsurance.com/what-is-full-coverage.aspx