The joy of car ownership entails a little more than regular oil changes and trips to your favorite coffee shop. You also need to think about how you’ll pay car repair bills in case you get into an accident—or medical bills if you cause an accident that injures others. But a good car insurance policy can help set your mind at ease.
You may have heard the term “full coverage car insurance.” It’s not a special policy type, but rather a term that typically refers to a policy that consists of liability, collision and comprehensive insurance. These three coverage types make a solid starting point for a good auto insurance policy. Here’s what they cover:
- Liability insurance: For accidents that you’re at fault, liability insurance covers the cost of the other party’s injuries and car repairs. It also pays for your legal defense if you’re sued for the car accident.
- Collision insurance: Covers the cost to repair your vehicle but doesn’t cover the cost of the other party’s vehicle damage. Collision insurance can pay for vehicle damage from another car hitting yours, or a situation where you accidentally back into a pole or accelerate into a building.
- Comprehensive insurance: Covers car theft and damage to your car related to weather, fire, flood, vandalism and falling objects. It also covers damage from hitting animals such as deer.
These coverage types make a solid starting point for good auto insurance.
Full Coverage Car Insurance Summary
|Pays for others’ damage if you crash into their cars||✓|
|Covers your car damage if you hit a pole, fence, house or other object||✓|
|Pays other people if you hit their fence, house or other property||✓|
|Covers theft of your car||✓|
|Covers your car for fire, flood, vandalism and animal collisions||✓|
|Covers your car damage from falling objects such as tree branches||✓|
How Much is Full Coverage Car Insurance?
Nationwide, the average full coverage car insurance policy costs about $1,134 per year, according to the National Association of Insurance Commissioners 2020 Auto Insurance Database Report.
The liability portion of an auto insurance policy is generally the most expensive component.
|Coverage||Average premium nationwide per year|
|Source: National Association of Insurance Commissioners, 2020 Auto Insurance Database Report|
What Does Full Coverage Car Insurance Consist Of?
Full coverage car insurance typically consists of three separate components: Liability insurance, collision insurance and comprehensive insurance. Here’s a breakdown of how each coverage type works.
All states except New Hampshire require car owners to purchase a minimum amount of liability car insurance. These minimum state requirements outline two types of liability insurance:
- Bodily injury liability insurance covers the medical expenses of another party if you’re at fault.
- Property damage liability insurance covers damage done to another person’s property that you crashed into. This could include someone else’s car, mailbox, fence, garden gnome collection or building.
Here’s an example of how liability car insurance works.
If you cause a car accident which results in physical damage to the other driver’s car and injuries, the other driver can make a claim against your liability insurance for car repair bills and medical expenses. Your liability insurance would also pay for a legal defense, settlements and judgments if the other driver sues you.
But here’s a catch. If you don’t carry enough liability car insurance, you could be on the hook for any amount that’s above your policy limit. That’s why it’s important to purchase more than your state’s minimum requirements. For example, if you cause a car crash with multiple injuries, the medical bills could quickly exceed the minimum liability requirements.
Consider at least liability limits with $100,000 in bodily injury liability per person, and $300,000 per accident, and $50,000 and up for property damage liability. Drivers with high incomes and/or significant assets should consider higher amounts in case someone decides to sue, plus umbrella insurance.
Does Liability Insurance Cover My Car If Someone Hits Me?
Your own liability insurance only pays others for damage you do. It will not pay anything for your own car or your injuries.
If someone else causes an accident, their liability insurance should cover your car damage and injuries. But the other person’s insurance will only pay up the limits they bought. If the accident was expensive, their insurance may not be enough to cover all your bills.
In addition, many drivers hit the road without any auto insurance at all. If they crash into you, they have no insurance to pay for the damage they cause. You can sue another driver who causes a crash, but not all drivers have assets to use to pay for a lawsuit judgment.
Collision and Comprehensive Coverage
Collision and comprehensive coverage are important for covering damage to your own car. Your liability insurance won’t pay for any of your car damage. If you own your vehicle outright then this coverage is optional. Expect to have to buy them if you have a car loan or lease.
Collision insurance pays for damage to your car from crashes with any object, such as a pole or guardrail. Comprehensive coverage pays for car theft and repairs due to weather, animal damage, vandalism, fire, flood and falling objects
For example, let’s say your car tires slipped on ice and you and ran into your neighbor’s fence. Collision coverage would pay for the repairs to your vehicle. Liability insurance would pay for the neighbor’s fence.
If you drove across a flooded street without realizing how deep it was, comprehensive coverage would pay for car damage.
Collision and comprehensive coverage both have a deductible, such as $500 or $1,000. That’s the amount of money deducted from an insurance check if you make a claim.
What is Recommended for Car Insurance Coverage?
Building out the best auto insurance policy usually requires adding a few more options to full coverage car insurance: Uninsured motorist coverage and personal injury protection. These types cover injuries to you and your passengers in different ways. In some states these are required.
Uninsured Motorist Coverage
Uninsured motorist coverage helps safeguard you against folks who are on the road with no auto insurance. Typically, if you’re injured in a car accident where the other driver is at fault, their liability coverage should cover your medical expenses. But if the other driver is uninsured, uninsured motorist coverage would help cover your medical bills.
A similar coverage, underinsured motorist coverage, pays your medical bills when the other driver is at-fault but doesn’t have enough liability insurance to cover your costs.
As with other kinds of auto insurance, these types pay up to the limit you have chosen. Buying low limits can mean you still have unpaid bills after an expensive car accident.
Medical Payments Coverage and Personal Injury Protection
Medical payments coverage (MedPay) covers medical expenses of you and your passengers no matter who was at fault. This can include ambulance, surgery and X-rays. It’s not available in all states.
Personal injury protection coverage (PIP) will also help cover medical expenses no matter who was at fault. Some states require PIP insurance. In other states it’s optional or not offered. PIP insurance can also pay for lost wages and for hiring help for tasks you can’t do because of an accident, such as child care.
Auto Insurance Extras
Rental Reimbursement Coverage
If your vehicle is out of commission because it’s in the repair shop, you may have to rent a car. Rental reimbursement coverage helps cover the cost of a rental car if the repairs are being covered under your insurance.
Usually, rental car reimbursements have daily and maximum limits. So make sure you understand the reimbursement limit before you rent a luxury SUV for a week. If you exceed the rental limit you can pay the difference yourself.
This is not the same as rental car insurance, which covers cars you rent for vacations and other non-accident purposes.
Roadside assistance insurance can pay for services such as help changing a tire, bringing you gas or lock-out assistance. If you already have roadside assistance from your car maker or a AAA membership, you don’t need this insurance.
If your car gets totaled (or stolen) and you make a collision or comprehensive claim, your insurance company will pay you a settlement based on the actual cash value (ACV) of the vehicle. But this settlement may not cover your auto loan or lease balance. This could leave you upside-down on your loan or lease.
If you have gap insurance, it will cover the difference between the settlement and the amount you still owe on the vehicle. Some lenders require gap insurance if you financed the car. If you have a lease, it might already be included in the cost.
How to Get Cheap Full Coverage Car Insurance
No matter what auto insurance options you choose, you don’t want to overpay. Here are ways to find affordable full coverage car insurance
Price shop: Before you purchase a policy, shop around for car insurance quotes. Make sure your quotes include the same coverage types and limits so that you’re comparing apples-to-apples prices. Comparison shopping alone can save you hundreds of dollars.
Take higher deductibles: A deductible is the amount deducted from an insurance check. Collision and comprehensive insurance have deductible choices such as $500, $1,500 and $2,000. When you raise your deductible amount you should save some money. There’s no deductible on liability insurance.
Maintain good credit: Many auto insurance companies use credit as a factor in pricing policies. They use a credit-based insurance score, which is slightly different from a regular insurance score. Insurers believe that credit can be used to predict whether you’ll make claims. Improving your overall credit history should in turn improve your credit-based insurance scores.
Take advantage of discounts: Car insurance discounts for bundling multiple policies and insuring more than one vehicle are common. You’ll also likely find low mileage discounts, safe driver discounts and price breaks for everything from going paperless to setting up automatic EFT payments.
Your car insurance policy is only as good as your next claim. If you’ve bought minimal coverage you can find yourself stuck with repair and medical bills to pay out of pocket. Buying ample car insurance is a way to protect the financial future you’re building.
Full Coverage Car Insurance FAQ
What is full coverage car insurance?
Liability, collision and comprehensive are generally considered full coverage car insurance. Some states require additional coverage types, such as personal injury protection and uninsured motorist coverage.
There are other coverage types you might want for the best car insurance, such as rental reimbursement coverage in case your vehicle is in the shop after an accident. Or gap insurance in case you have a big car loan.
Is it worth having full coverage auto insurance?
Having full coverage car insurance will give you much better financial protection than buying simply the state minimum for liability insurance.
Liability auto insurance alone won’t cover your own vehicle from problems such as hitting an object, floods, fire and car theft.
Do you have to have full coverage insurance when financing a car?
It’s unlikely that you can get away with not carrying full coverage on a financed car.
If you have a car loan or lease, the lender or leasing company will require you to have collision and comprehensive insurance. That’s to protect their interests. They don’t want you to walk away from the loan or lease if the vehicle is destroyed or stolen.
Dropping collision and comprehensive coverage from a financed vehicle could default the loan.
Do I need full coverage insurance on a used car?
If you took out a loan or lease to buy a new car, your lender or leasing company will most likely require that you carry full coverage car insurance.
But even if you don’t have a loan or lease on a car, every state except New Hampshire and Virginia requires you to carry the state’s minimum for liability insurance. It’s a good idea to buy more than your state’s minimum. A rule of thumb is to buy at enough liability insurance to cover what you could lose in a lawsuit.