Liability vs. Full Coverage Car Insurance: Which Is Better – New and experienced drivers alike will come across terms like ‘liability’ and ‘full coverage car insurance’ when searching for a policy. Knowing what these terms mean is essential. Although you may have heard these terms before, you may not know the exact differences between them.
Don’t worry, you are not alone. A lot of drivers find shopping for car insurance confusing and full of different terms. In this article, we will explain liability vs. full-coverage car insurance. And tell you what you need to know to decide which policy has the coverage types that fit your needs and budget.
What is Liability Car Insurance?
This policy helps to pay for injuries and property damage that you are responsible for. For instance, if you accidentally cause an accidents that results to someone else injuries or property damage, your liability coverage can pay for their medical bills up to the limits in your policy. Also, the policy can cover legal expenses if you get sued over the car accident you are responsible for.
And the property damage section of the coverage would pay for the repair costs up to the limits in your policy. Your state may have a minimum requirement for this insurance. However, the state minimum might not be enough, especially if you cause a huge and costly accident. It is advisable that you purchase adequate liability-only auto insurance to cover you in case of a lawsuit.
What is Full-Coverage Car Insurance?
“Full coverage car insurance” isn’t a specific type of policy. Instead, it is a whole policy that includes liability, collision, and comprehensive coverage.
Liability insurance is mandatory in several states, but collision and comprehensive are not. If you’re financing or leasing a vehicle, your lender or leasing company will likely have insurance requirements. They’ll probably require both liability and full coverage car insurance.
Collision and comprehensive insurance have different coverage. But mostly insurers sell them together. Each of these coverage comes with a deductible, which is the amount subtracted from your claim check. The most your policy will pay out is the actual cash value of the vehicle or the amount it’s worth before it’s considered a total loss, minus the deductible.
- Collision insurance: This coverage helps to cover the costs of repairing. Or replacing your vehicle, regardless of who is at fault in the accident, whether it’s you or someone else. For instance, if you run into a policy, you can file a claim for this coverage. However, it does not cover the damage to a third party’s car. The liability insurance will help cover that.
- Comprehensive insurance: this coverage will pay to replace or repair your vehicle for issues such as fire, hail, falling objects, animals, theft, or vandalism. For example, if an object falls on your vehicle, you hit a car, or the vehicle gets damaged by hail. You can file a claim for this coverage.
Is Liability Car Insurance a Better Option?
This coverage is a good way to display your financial responsibility. This means you don’t need to worry much about expenses if you cause a car accident. In most states in the United States, except for Virginia and New Hampshire, you are required to have a minimum of liability insurance. Even those states may have liability requirements in some situations. For instance, in New Hampshire, you are required to purchase this coverage under the following conditions:
- You were convicted of driving under the influence or being intoxicated, and you must file an insurance proof for a minimum of 3 years.
- You are responsible for a car accident, and you do not have coverage. You are now required to file for insurance proof.
- The individual must make an appearance at an administrative hearing for some offenses. And purchasing an auto policy is the condition for getting back or retaining the license.
- Your license was taken because of a habitual offense, but you must show proof of insurance before getting it back.
In New Hampshire, if you don’t want liability insurance, you need to prove you have enough money to cover any damages you are responsible for in an accident. If you can’t show this, you might lose the privilege of driving in New Hampshire. That’s why many drivers in this state purchase this coverage, even though it’s not required.
Meanwhile, in Virginia, you can skip buying this coverage by paying a $500 yearly fee to the state. However, if you are responsible for an accident, you’ll still have to pay for all the damages and injuries out of your own pocket.
How much does Liability Insurance Cost?
According to the National Association of Insurance Commissioners, the average cost for liability insurance coverage is up to $650 annually. However, the cost may vary depending on various factors. These factors include your driving history, vehicle model, location, age, the amount of coverage you want to purchase. Others includes your insurance claim history, your gender, occupation, credit, and marital status.
Is Full Coverage a Better Option?
If you lease or finance a vehicle, your lender or the leasing company may be required to have a full-coverage auto policy. Comprehensive and collision insurance will protect their interests in case the vehicle is stolen or gets totaled. Dropping the collision and comprehensive coverage from your leased or financed vehicle can void the loan or lease terms.
Even if the vehicle is your own, it is advisable to go for a full-coverage car policy if you want to cover problems such as hail damage, car theft, and other various problems. If your policy doesn’t include collision and comprehensive coverage. You may face significant expenses if your car is damaged or destroyed by unexpected event.
How much does Full-Coverage Car Insurance Cost?
According to the National Association of Insurance Commissioners, the average cost for a full-coverage auto policy is up to $1,204 annually. Keep in mind that the liability portion of the policy is always the most expensive part. The national average annual premium for liability is $650, collision is $381, and comprehensive is $174. However, the cost of the policy may vary depending on several factors, such as your driving history, location, the amount of coverage you want to buy, and many more.
Liability vs. Full Coverage Car Insurance: Which is better?
The main difference between liability and full coverage car insurance is that liability covers damages you cause to others while driving. Meanwhile, full coverage includes liability coverage along with other coverages to protect you, your passengers, and your car on the road.
If you want to just meet the minimum amount of car insurance requirements in your state, liability insurance is the better option. But if you want coverage that protects you and your car in case of an accident, regardless of who is at fault. Then you should opt for full-coverage car insurance.
When you want to put together your policy, you can add in extra coverage types to help fill in the gaps you may have out of pocket. Some of the additional coverage types to consider include uninsured motorist coverage, gap insurance. Others includes rental reimbursement insurance, roadside assistance, medical payments coverage, and personal injury protection.