How much do you really know about full coverage auto insurance? Do you even need it? Whether your goal is to make an informed decision on purchasing full coverage insurance, or simply to understand full coverage components and compare it against other insurance products, we’ve got you covered.
Clarifications on Full Coverage
Full coverage auto insurance goes beyond the minimum coverage required, which is typically liability only. Liability insurance is meant to provide coverage to any injured party or their damaged property when you were at fault for the accident. However, what happens to your vehicle in this case? How will you cover the costs of damage to your own vehicle or self? This is where full coverage comes in.
Full coverage is a combination of liability and collision coverage, and often includes comprehensive coverage. Collision insurance covers your injuries or vehicle damages in the event you cause an accident, while comprehensive coverage covers damages to your vehicle from theft or vandalism, or natural events such as fire, wind, hail, falling debris, etc.
What does it cover?
The chart below breaks down coverage options by scenario so you can better understand what each type covers…
Now that you can see what each main type of auto insurance covers in the event of an accident or injury, you can better understand what full coverage is and how it can benefit you.
Full Coverage is perfect if you want to make sure both you and the other party are taken care of in the event you cause an accident. This is a wise investment if you are financing your vehicle and still owe a lot of money on it. Regardless, full coverage will cover up to the value of your vehicle if totaled or in need of repairs.
What doesn’t it cover?
Based on the chart above, you see that full coverage does not cover your injuries or damage to your vehicle if it is someone else’s fault. Just as you would have to use your liability insurance in the event an accident is your fault, so too will the other party in the event it’s theirs. That is why uninsured/underinsured motorist coverage is important; it kicks in when the other person has no insurance, or their liability is too low to cover the cost associated with your damage or injuries.
Most of the time full coverage includes comprehensive, and it can even include uninsured/underinsured protection, and other supplemental products. It is important to confirm the components with whichever carrier you decide to get insured through.
How Much Does Full Coverage Insurance Cost?
Full coverage can be affordable, depending on certain factors. As a point of reference, Cheap Full Coverage Auto Insurance has calculated that full coverage car insurance in the U.S. costs on average around $99/mo., compared to a monthly average of around $64 for liability only, as estimated by Fool.com. Remember, full coverage typically includes liability, collision, and comprehensive coverage, with some plans covering more.
Also, you could be eligible for discounts and/or bundles that lower your overall rate. Multi-policy discounts are boasted amongst many top insurance carriers, so it could pay to check with your current homeowners or renter’s insurance provider to see if they bundle with auto.
Factors That Impact Rates
There are many variables that will cause these rates to fluctuate for the average consumer.
Top 5 factors that will affect your rate include:
Age – Drivers older than 75 have higher rates than other age groups, next to teens and young 20’s. An experienced driver in their 30’s and 40’s seems to be the sweet spot.
Driving record – At fault accidents, speeding tickets, and prior dui(s) drive up rates exponentially.
Credit score – Credit-based insurance scores help insurance companies gauge the likelihood that you will file a claim. A poor score leads to higher premiums.
Driving experience – New drivers have higher rates due to being at a higher risk for accidents. The longer you keep an excellent driving record, the better your rates will be.
Vehicle type – Certain vehicles, such as sports cars, are more expensive to insure.
*Here’s a tip: Get quotes for a new policy every 6-12 months make certain you have the best deal available to you.
How to Shop for Full Coverage Insurance
If you already have some form of auto insurance, it is important to double check a few things with your current carrier. First, do you have full coverage? If so, what is included in your policy? Can you bundle policies for discounts? Do they offer other discounts or savings for good drivers? Make sure you understand your current plan(s) and insurance carrier(s) before making changes to any policies or switching.
If you are currently uninsured, make sure you understand the type of coverage you want vs. the type of coverage the law, or your lender requires you to have. Decide what plan is best based on your specific needs and personal circumstances.
Coverage Requirements by State
Every state in the U.S., aside from FL, requires bodily injury liability insurance, and every state plus Washington, D.C., requires property damage liability. Over 20 states require uninsured/underinsured motorist insurance, and over a dozen states require personal injury protection insurance (PIP). These individual components make up most liability plans.
No states require collision or comprehensive coverage, therefore full coverage is only an option. Although tempting to skip for penny pinching, what if you are in a serious accident? Do you have the money to confidently cover the costs associated with it? Even low liability insurance limits can lead another driver can go after your savings and property to pay for the cost of damages.
*Consider this: if you have six figures or more in assets and/or drive a lot, you could benefit from buying a full coverage policy to boost your protection.
Do You Need Full Coverage Insurance?
Even though full coverage insurance is not mandatory, for the most part, drivers seem to understand the value of insuring their car. A recent study shows 78 percent of drivers purchased comprehensive coverage on top of their liability, and 74 percent bought collision coverage as well. It is also important to note that many lenders require full coverage with collision and comprehensive coverage for any vehicle financed. After the loan is paid, you can then decide whether you want to keep your full coverage insurance or make changes to your policy. Regardless, having full coverage can give you the peace of mind needed in the event your vehicle is totaled or needs serious repairs. With your vehicle being such an important asset, it makes sense to protect it fully. Full coverage auto insurance is a well-rounded, affordable way to achieve this result.