We all know that auto insurance is essential and almost mandatory in every state, but what type of auto insurance do you need?
We’ll discuss what full coverage auto insurance is and compare it to the other types of auto insurance available so you can see if full coverage is what you need.
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The term "full coverage" car insurance is a common phrase employed by agents, lenders, and car dealerships to describe a policy encompassing several specific coverages. It doesn't represent a distinct coverage type but is a convenient way to discuss a combination of protections designed to shield policyholders from various situations.
When someone uses the term "full coverage" car insurance, they are typically referring to the following key coverages:
Liability coverage (typically including Bodily Injury and Property Damage)
Comprehensive coverage
Collision coverage
“Full coverage" auto insurance may also encompass additional coverages such as:
Uninsured Motorist coverage
Gap Insurance
24-hour Roadside Assistance
Do I Need Full Coverage Auto Insurance?
The age-old question is, is full coverage auto insurance necessary, and do you really need it? Here are a few reasons you might consider opting in for full coverage:
Financing a vehicle: Generally, lenders insist on obtaining "full coverage" and any other mandatory coverages dictated by your state.
Financial security: The absence of "full coverage" might mean you'll have to personally cover the costs of replacing your vehicle if it's stolen or wrecked.
Safeguard your finances: Possessing "full coverage" safeguards against various situations that could otherwise pose a financial threat.
However, if you aren't under a loan obligation or other financial commitments for your vehicle, most states solely necessitate Liability coverage.
Full Coverage Auto Insurance Vs. Liability Coverage
Liability insurance is a legal requirement in nearly every state.
Opting for a Liability-only insurance policy means that if you're responsible for an accident, you'll have financial protection against the damages you inflict upon other vehicles and the injuries you cause to other individuals.
It's important to note that Liability coverage doesn't extend to your personal expenses. For example, it won't cover repairing your vehicle following an accident or another incident. To secure such coverage, you'll need to acquire additional protections typically included in a "full coverage" insurance policy, such as Comprehensive and Collision.
In contrast to Comprehensive and Collision coverages, Liability coverage usually doesn't necessitate a deductible payment before it starts providing coverage.
Full Coverage Auto Insurance Vs. Comprehensive Coverage
Comprehensive coverage constitutes a single component of a comprehensive auto insurance plan.
It's crucial to understand that "full coverage" doesn't represent an independent coverage type; rather, it serves as a broad term utilized to characterize a policy that incorporates Liability, Comprehensive, and Collision coverages.
When you invest in "full coverage" car insurance, you can generally anticipate Comprehensive coverage, also known as coverage for non-collision events that damage your vehicle, to be a part of your policy.
Additional Auto Insurance Coverage Options
Rental Reimbursement Coverage
Rental reimbursement coverage assists in covering the cost of a rental car when your own vehicle is undergoing repairs following a covered incident. Reviewing the coverage limits is important, as rental reimbursement generally provides compensation up to a specific daily dollar amount for a predetermined number of days.
Uninsured and Underinsured Motorist Coverage
Uninsured motorist coverage provides a safety net against drivers who lack auto insurance coverage. In the event of an accident caused by another driver, their liability insurance typically covers your medical expenses—unless that driver is uninsured. In such cases, your uninsured motorist coverage assists with the costs linked to your injuries.
Underinsured motorist coverage functions in a similar vein. It becomes active if the at-fault driver has insurance but their liability coverage limits fall below the thresholds set for underinsured motorist coverage in your state. To understand your state's specific requirements or gain more insights about this coverage, you can consult your state's insurance regulations or inquire with your insurance agent.
Medical Payments Coverage or Personal Injury Protection
Medical payment coverage assists in covering your medical expenses, as well as those of your passengers, following an accident, regardless of fault. This can encompass various expenses such as surgical procedures and X-rays.
Personal injury protection (PIP) isn't universally offered but is mandatory in certain states. PIP functions much like medical payments coverage, aiding in paying your medical bills stemming from a covered incident. PIP may help with other costs during your recovery, such as child care services and compensating for income lost due to your injuries.
Should I Invest in Full Coverage Auto Insurance for an Older Vehicle?
Let’s be real; the goal is to avoid paying more for insurance than the actual value of your vehicle!
When determining the necessity of "full coverage," take into account the following factors:
Your premium: If your auto insurance premium equals or exceeds 10% of your car's value, it may be wise to contemplate a Liability-only policy. For instance, if your car's market value is $5,000 and you're shelling out $500 or more annually for "full coverage" insurance, it might not be cost-effective.
Your deductible: Is your car's value less than your deductible? For instance, if you have a $1,000 deductible for Comprehensive or Collision, yet your vehicle is appraised at only $500, retaining these coverages might not make financial sense.
Your savings: Even if your car is paid off, retaining "full coverage" could still be prudent if you lack the financial means to replace your vehicle after an accident, irrespective of age or mileage.
How Much Does Full Coverage Auto Insurance Cost?
Remember that "full coverage" auto insurance isn't an official insurance term. Instead, it serves as a general description for coverages that offer protection against liability and assist in covering your vehicle's repair costs. The expense of your auto insurance hinges on the extent of protection you include in your policy, alongside other factors. These factors include driving frequency, vehicle type, local auto insurance regulations, chosen deductibles, etc.
To identify the policy that aligns with your driving requirements and financial plan, comparing auto insurance quotes online is always advisable!
Get the Best Auto Insurance Coverage for You Vehicle
The appropriate level of coverage varies from one driver to another. Factors such as your driving frequency, the primary purpose of your vehicle, and specific state mandate all play a role in determining the ideal coverage for you. Getting a quote and doing a quick comparison is an effective way to explore all the auto insurance coverage possibilities!
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