Is Liability Only Insurance a Good Move for an Older Car? Here's What I Learned

INSURANCE - CAR INSURANCE
Liability only insurance is less expensive, but provides much less protection than full coverage car insurance.
Updated Dec. 14, 2023
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Just about everyone is looking for ways to cut expenses these days, me included. In looking at the most-expensive bills I have in a month, my car insurance comes second to my mortgage. I have full coverage car insurance on a 2014 Toyota Corolla with high mileage. Kelly Blue Book values it at about $4,000 and I pay about $2,000 annually for liability, collision, comprehensive, and additional coverage.

I paid my car off in January, and I’ve been wondering whether it makes financial sense to drop the collision and comprehensive and change my policy to liability only now that I’m not required to have full coverage. Doing this will surely save me money in the short term, but I would be giving up money I could claim to fix my car and pay for medical bills should I get into an accident, as well as other protections. Is this a gamble I’m willing to take?

Here is a look at what it means to go from full coverage to liability only insurance and everything you need to know if you’re thinking about switching car insurance types.

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What does liability only insurance cover?

So, what is liability insurance coverage? Liability car insurance provides money to a party that is injured when you are at fault for an accident. It usually covers physical damage you caused to the other car or property, as well as medical expenses should someone be injured in an accident. There are two common types of liability coverage on a typical car insurance policy: property damage liability and bodily injury liability.

“When you say liability only versus full coverage, people generally think liability only means that your car isn’t going to be covered, but that’s not necessarily true,” says Joelle Ferraiuolo, a licensed insurance agent with Insurance Marketing Agencies in Worcester, Massachusetts. “Sometimes if you ask for ‘just liability,’ you are also removing other necessary coverage that is not mandatory, like medical, personal injury, and uninsured/underinsured motorist coverage.”

Liability only insurance does not provide you with money for your own vehicle’s damages or physical injury to yourself. Those would be covered if you have comprehensive and/or collision insurance on your policy. Collision provides funds for repairing or replacing your vehicle and protects you from being sued if you’re at fault for an accident. Comprehensive car insurance covers damages from weather, theft, fires, and other things beyond your control.

If you choose liability only insurance, you can often add on additional coverage. This could include:

  • Uninsured/underinsured, which provides you some coverage if you’re injured by someone who doesn’t have insurance or doesn’t have enough to pay for all your damages.
  • Medical payments coverage, which will give you some money to help pay for your injuries if you have liability only coverage.
  • Comprehensive, which covers you for theft and damage you can’t prevent. You don’t have to have collision coverage to have comprehensive coverage.

Ferraiuolo says most liability only policies will include uninsured/underinsured driver and medical payments coverage, but not always. She recommends speaking with a licensed insurance professional to discuss your needs, what a prospective policy covers, how much money will be paid toward specific injuries/damages, and what amounts you’re comfortable with.

Liability only insurance coverage: the pros

The only real advantage of liability only coverage is that you save money on car insurance. It is less expensive than full coverage with collision and comprehensive. This can be a plus in some situations. For example, if you have a vehicle that is driven very little, carrying a liability only policy may be just what you need.

If you find you’re not driving much as a result of the coronavirus pandemic, you could consider dropping down to liability only coverage until you’re back to a more regular driving schedule. This could offer some much-needed relief to help you survive a short-term money crunch. Just make sure to weigh the pros and cons and add your previous protections when you’re driving more.

Liability only insurance could also be a good idea if the value of your vehicle is less than the cost of the policy. In my situation, my car is worth $4,000 and I’m paying around $2,000 annually for full coverage. Keeping my policy as-is may be the better choice for me because my car is worth double what I’m paying for insurance. If my car was only worth $1,000, then liability only might be a better idea for me.

Liability only insurance coverage: the cons

Choosing liability only insurance comes with its disadvantages. First, you may not have adequate coverage for damages, even if you adhere to the minimum requirements for auto insurance in your state.

Ferraiuolo says that liability only insurance requirements vary from state to state and most states’ minimum coverage mandates are set too low to adequately cover property and bodily injury claims. This puts you at risk for being held liable for the amount of money your policy doesn’t cover.

Second, if you get into an accident, you will have to pay out-of-pocket for repairs or even a new vehicle, depending on how much damage there is. If you don’t have medical payments coverage with your liability only policy, you could also have to pay for treatment of your own injuries.

Third, you won’t have coverage if your vehicle gets stolen; roadside assistance or towing if you have a problem; a rental car to drive while yours is getting repaired; and other benefits that may come with full coverage. Although you may not have to file a claim often, these services come in handy when you need them.

After doing some research and thinking through the pros and cons of going liability only, I decided to stick with my full coverage. I’m not driving so much these days because of the pandemic, but I want to know that should something happen while I’m driving that I am fully covered. I’m willing to pay $160 a month for that security.

FAQs about liability only coverage

What's the difference between liability and full coverage?

Liability pays for body and property damages others suffer when you’re at fault in an accident. It doesn’t pay for damages to you or your vehicle/property. It may or may not include additional coverage for medical payments and/or if you’re injured by a driver who doesn’t have any or enough insurance to pay for your expenses. Some policies include all three provisions, and some require you to add these provisions.

Full coverage includes everything liability only does, as well as paying for damages and injuries you experience as a result of an accident you caused, injuries or damages caused by forces out of your control (hail, storms, theft, etc.), and providing legal protection should you be sued for damages (some liability policies may have some provisions for this). Policies with full coverage may offer additional benefits, such as free rental cars and roadside assistance.

Should you have liability only coverage?

Only you can answer that question. Every state requires a minimum amount of liability coverage for any vehicle you own. If you have a vehicle you don’t use very often or is worth less than what you would pay for full coverage, or can pay out-of-pocket to replace your vehicle should it be totaled, a liability only policy might be a good fit. If you don’t fit these circumstances, you may want to consider more coverage than liability only can provide.

How much liability coverage do you need?

At the very least, a liability only insurance policy has to meet the mandated state minimum. Since these minimums are often well below what realistic injuries and damages would cost in an accident, it’s a good idea to pay more for coverage that has higher limits for how much will be paid out for each type of injury. You may want to speak with a licensed insurance professional to discuss options.

How much cheaper is liability than full coverage?

The amount of money you’ll save if you choose liability only insurance depends on several factors and how specific insurance carriers calculate rates. These can include how many drivers are on your policy, their ages and driving records, what type of vehicle you’re insuring, where you live, how much you travel, etc. There is no set formula for determining the savings you’ll get by going liability only.

The bottom line on liability only coverage

For me, switching car insurance from full coverage to liability only would not be a good move. I would be giving up a lot of protection for a car that still has some value to it. I plan to drive my Corolla until it dies, so at some point in the future, my insurance needs might change. But for now, the expense of full coverage is worth it for me.

If you’re like me and thinking about your car insurance options, look beyond the price tag an insurance company offers and spend some time considering what kind of coverage you get for your money. In my experience, you get what you pay for. When you’re giving up a significant amount of protection by choosing liability only insurance, you’ll want to make sure that your policy has your back when you need it.

Take some time to shop around and speak to multiple insurance professionals. Ask questions about what coverage you get by going the liability only route and what you can add on to increase your protection. The answers might surprise you. In the end, though, you need to choose the best car insurance for your situation.

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Author Details

Robin Kavanagh Robin is a freelance writer who lives on the South Carolina beach. She has spent the last 20 years writing about all kinds of topics for publications such as The New York Times, Yes! Magazine, Next Tribe, Parenting, and various trade magazines. On FinanceBuzz.com, you’ll find her mostly writing about smart ways to use credit cards, navigating personal loans, how to save when traveling, and ways to improve your financial health.

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