Full Coverage Car Insurance: What It Is & What You Need
Although the term “full coverage” is commonly used by consumers, it doesn’t have an official definition. In popular jargon, the term is generally used to describe a policy that covers more than the bare minimum required by law and includes coverage for damage to your own car when the other driver's insurance won’t. Common variations include:
- A policy that includes liability, collision and comprehensive
- A policy that includes the state minimum coverage, plus any additional insurance required by the lender who financed your car
- Coverage that will take care of anything and everything in the event of a crash or incident
Without an official definition, each of these descriptions is equally valid. If you want to be “fully covered” by car insurance, the most important thing is to choose the right insurance coverage that's worth it for your own situation. To help you select the appropriate auto insurance products, we’ll walk you through the important issues you should take into consideration.
Then, when you are ready to shop, our Car Insurance Quote Generator will help you compare insurance prices and see how changing your types and levels of coverage will affect your premiums.
Let’s start with the basics.
Minimum coverage requirements vary by state, and whether or not you have financed or leased your vehicle. If you own your car outright and live in a more lenient state, your situation may only require you purchase liability insurance. On the other hand, you may be required to also carry personal injury protection, uninsured/underinsured motorist, collision and comprehensive policies.
First, depending on where you live, you may be required by law to carry the following types of insurance:
Liability insurance covers the bodily injuries and property damage you cause to other people when you’re responsible for a car accident. Every state essentially requires drivers to carry some level of liability coverage. Learn more about liability insurance.
Personal injury protection (PIP) insurance covers medical expenses for you, members of your household and your passengers after a car accident regardless of fault. This insurance is not available in every state, but it is mandatory in the 15 states shown in the map below. Learn more about PIP insurance.
Uninsured/underinsured motorist coverage protects you when you are harmed by a driver who either has no insurance or not enough coverage to pay for all of your expenses after an accident. Like PIP insurance, it’s not available in every state, but the 21 states and D.C. listed below mandate some form of this insurance. Learn more about uninsured/underinsured motorist insurance.
You’ll be required to purchase additional coverage if you finance the purchase of a car through a loan or a lease. Since your car serves a collateral for your loan, the lender or leasing company will want that collateral protected. This usually means purchasing two additional types of insurance:
Collision insurance covers damage to your own vehicle after an accident. Learn more about collision insurance.
Comprehensive insurance covers damage to your car caused by incidents other than an accident, such as fire, flooding, vandalism, and theft. Learn more about comprehensive insurance.
To choose the right coverage for your own situation, you’ll need to consider types of coverage, coverage limits and deductibles:
- Choose the right types of insurance. Start with the insurance that you’re required to carry. Then, if you don’t have an auto loan but your car is fairly new, you may still want to purchase collision and comprehensive insurance. Start by asking yourself whether you could come up with the money to replace your car after a serious accident. If the answer is no, then collision and comprehensive insurance are important additions to your coverage. On the other hand, if you own an older car outright and it doesn’t have a high blue book value, then collision and comprehensive policies are probably not worth it. You’ll pay more for insurance in just a few years than your car is worth. Other policies such as roadside assistance, rental reimbursement coverage, and a personal umbrella policy are more a matter of your personal circumstances and preferences. To make an educated decision learn more about the many types of car insurance here.
- Choose the right coverage limits. When you select a liability insurance policy, you will choose specific dollar-amount limits of how much it will cover. To protect yourself and others you may harm in an accident, choose the highest limits for liability coverage you can afford.You can reduce your premiums by choosing just the minimum required by state law, but keep in mind that your responsibility after an accident doesn’t stop at your coverage limits. If your insurance doesn’t cover all of the medical expenses and property damage you cause, you are still responsible for the rest.
- Choose the right deductibles. A deductible is the amount you must pay after a covered loss before your insurance kicks in. Some types of coverage, such as collision and comprehensive, will have a deductible you can select. You can save on insurance premiums by selecting a higher deductible, but make sure the deductible you choose is one you could afford to pay. The higher your deductible, the more you pay out of pocket after an incident.
Many people have questions about the scope of their car insurance coverage. Answering them is crucial to determining if you’re fully covered.
- Does my insurance cover other drivers of my vehicle? In general the answer is yes: Your car insurance policy will provide the same level of coverage regardless of who is driving, but check with your insurance company or agent to be certain of your policy’s provisions. You should also make sure all drivers in your household are listed on your policy -- or, if necessary, specifically excluded. Family members, for example, should be listed. Roommates or housemates should be listed, too, if you permit them to drive your car.
- Does my insurance cover rental cars? The answer is generally yes: The insurance coverage you have for your own car will also protect you when you are renting a car. Be sure to check the details of your policy before purchasing any additional insurance at a car rental counter. Learn more about rental car insurance.If you want coverage that will provide a rental car to you when your car is being repaired after an accident, you’ll need to add rental reimbursement coverage to your car insurance policy. Learn more about rental reimbursement coverage.
- What doesn’t my insurance cover? You should also be aware that beyond the insurance you’re required to carry, there are many additional types of insurance coverage that are optional. For example, you can get coverage to protect you if you’re upside down on a car loan, or coverage to protect your assets even after a very large judgment against you. Learn more about the types of car insurance.
Image: Mathias Rosenthal/Shutterstock
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