Full Coverage Car Insurance: Who Needs It?

Full coverage auto insurance covers different things depending on your chosen insurance company. Generally speaking, full coverage auto insurance includes bodily injury liability, property damage liability, collision, and comprehensive coverage. A full coverage policy can protect you from paying high costs such as medical bills (for yourself or others) and vehicle repairs.

Not everyone needs full coverage insurance, but it might be worth it if you drive a lot, have an expensive car, or live in a natural disaster-prone area. It might also be worth it if you want greater peace of mind than state minimum insurance would give you.

Here, we’ll go over the types of car insurance that make up full coverage and whether you need them.

What is full coverage auto insurance?

Full coverage auto insurance is a package of insurance policies generally including at least bodily injury and property damage liability, collision, and comprehensive coverage. These policies can also include other types of insurance, such as personal injury protection or medical payments, customized to meet your state's car insurance coverage requirements and fit your needs.

What about basic liability coverage?

Basic liability insurance coverage typically only covers damages or injuries you cause to someone else and only up to the specified limits of your policy. You are responsible for vehicle repairs or replacement costs, medical expenses, and any other incidents exceeding your policy limits. Basic liability coverage can leave you financially exposed.

A full coverage insurance package generally goes above the minimum coverage required by law and offers more complete coverage. You’re less likely to have to pay for the cost of an accident or damage to your vehicle all by yourself.

Of course, the more insurance coverage you add, the more your premium is likely to go up, so it’s essential to find a good balance between making sure you’re covered for random accidents or problems and not having so much coverage that you’re wasting money.

What does full coverage car insurance consist of?

Full coverage auto insurance is not a standardized term throughout the insurance industry. Each company may define “full coverage” differently and offer different policies based on where you live or the car you drive. But a few policy types are in basically every company’s full coverage option because they are often required by state law.

1. Bodily injury liability

If you cause an accident, this coverage helps to pay for medical bills or loss of income if people in the other vehicle are injured. This coverage should also protect you if you are an authorized user driving someone else’s car and get into an accident.

2. Property damage liability

 If you or an authorized person driving your vehicle causes an accident, this policy will help pay for damages to another person’s car or property — but not yours. Along with bodily injury liability, state laws usually require property damage liability coverage.

3. Collision insurance

Regardless of who’s at fault in an accident, this coverage will help pay for damage to your car if you hit another vehicle, hit an object, roll your car, or get hit by another car. Collision coverage often has a set deductible, which is the amount you pay before your insurance kicks in. Deductibles usually range from $250 to $1000, so don’t forget to factor this into your insurance costs.

4. Comprehensive insurance

This type of coverage helps you recover from losses due to damage caused by something other than a collision. This may include theft, fire, hitting an animal, vandalism, and more. Your comprehensive coverage should help you cover the costs of repairing your vehicle. Some lenders require you to carry this coverage until your car is paid off.

5. Uninsured/underinsured motorist bodily injury liability

This coverage can help cover medical costs when you’re in an accident involving an uninsured driver or a driver with insufficient insurance coverage. It can also help pay for your medical bills if you’re involved in a hit-and-run accident or if you’re hit as a pedestrian.

6. Uninsured/underinsured motorist property damage coverage

This type of coverage helps you cover the damage to your vehicle if an uninsured or underinsured driver hits you. Underinsured and uninsured motorist liability coverage is required in several states, so it may be part of a full coverage package provided by your insurance company.

7. Personal injury protection (PIP)

Personal injury protection coverage pays for medical expenses you or any passengers in your car may have sustained in a car accident. Depending on the type of policy, PIP may also pay for lost wages if you can’t work or for assistance with services you can’t perform while injured (such as house cleaning). In a worst-case scenario, PIP can even cover funeral costs. Several states require PIP coverage for all drivers.

8. Medical payments (MedPay)

MedPay is similar to PIP in that it covers medical expenses for you and your passengers if you’re injured in a car accident. Although accident-related costs, such as an ambulance ride or a doctor co-pay, may be included under the coverage, MedPay doesn’t generally cover things like lost wages or essential services. It’s not as comprehensive as a PIP policy.

The protection you actually get with full coverage auto insurance

Although the policies above cover much of the damage you may run into on the road, they still have some exclusions. You may need to add additional coverage to ensure financial protection from all possible events.

Some of these optional policies can include the following:

• Roadside assistance
• Gap coverage
• Rental car reimbursement
• Mechanical breakdown
• Towing and labor
• Additional coverage for custom cars, custom parts, or specialty vehicles

You might be tempted to add on a lot of optional policies for peace of mind, but remember that each add-on costs extra money each month.

When should you purchase full coverage car insurance?

Most policies that make up a full coverage car insurance package aren’t required by law, but it’s usually a good idea to have some coverage. You can go with the bare minimum and still drive legally, but that won’t be very helpful if you get into an accident.

You might want full coverage insurance if you drive a high-value vehicle, live in a place prone to extreme weather or animal collisions, or have a long commute (which means you’re on the road more often and at busier times of the day).

Additionally, you may be required by your bank or leasing company to maintain certain types of insurance above the state liability limits to protect both you and your lender if you get into an accident.

Typically, a leased vehicle will require more coverage than a financed vehicle. With financing, the desired end result is taking over ownership of the vehicle, but with leasing, you’d be returning it at the end of the lease. Because the owner of a lease will always be the company you’re leasing the vehicle from, it has more to lose if your car doesn’t have full coverage and you’re in an accident.

When is full coverage not worth it?

Full coverage may not be worth the cost if you own an older or high-mileage car or don’t drive very often.

Comprehensive and collision insurance only covers the cost of your vehicle at the time of the accident. If you have a high insurance deductible, or if your car isn’t worth very much, you may be able to drop collision and comprehensive coverage if the monthly cost of insurance over time may exceed the value of your vehicle.

Generally, if the cost of your full coverage insurance is more than 10% of the value of your car, you can consider reducing or removing some of your coverage. Because insurance only covers the current value of your vehicle, paying more than 10% of your car’s value for insurance may provide diminishing returns.

Be sure to speak with your insurance agent to ensure you maintain the minimum insurance coverage required in your state and minimize the chance that you’ll be personally responsible for any gaps if you cause an accident.

How to find affordable full coverage auto insurance

No one wants to pay more for insurance than they have to. Full coverage auto is generally more expensive than basic liability coverage, and it can be costly depending on how much your vehicle is worth and any optional policies you add on.

There are various ways to lower your car insurance costs, especially if you understand the factors that affect car insurance rates. You can usually save money on your auto insurance policy through strategies such as these:

• Taking advantage of any discounts offered by your insurance provider
• Shopping around car insurance companies for the best rates
• Taking a safe driver or defensive driver course
• Raising your credit score and maintaining good credit history
• Raising your deductible
• Reducing optional insurance coverage on an older vehicle
• Bundling your multiple policies (such as homeowners, renters, or life insurance with auto) for an additional discount

If you can, comparing auto insurance quotes on different vehicles before you buy a new car can also be a great way to save money on car insurance because insurance costs are based on the car's value, its safety rating and the likelihood of theft, among other things.

Comparing costs and coverage options across multiple companies may seem like a chore, but it’s one of the best ways to know you’re getting the best deal on the coverage types you need.

FAQs about full coverage car insurance

Bottom line

Full coverage car insurance isn’t exactly what it sounds like. You won’t be fully covered for every driving incident, but you could be covered in many different situations. Because full coverage insurance typically includes liability, collision, and comprehensive coverage, you could have a lot of your bases covered.

Whether you need this much coverage depends on your situation. Car insurance can be expensive, so you should approach getting a new policy with a clear idea of your coverage needs and how much is necessary. Then, shop around and find quotes using different online marketplaces. You could end up saving a lot of money.