What is the difference between full coverage and liability car insurance?

If you're wondering what's the difference between full coverage and liability car insurance, you should know that liability pays for damage you cause to others while full coverage includes collision and comprehensive for damage to your property.

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UPDATED: Jun 2, 2022

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Written By: Laura BerryReviewed By: Joel OhmanUPDATED: Jun 2, 2022Fact Checked

Here's what you need to know...

  • It’s illegal to drive without your state’s minimum insurance requirement
  • Liability coverage is considered the most basic of insurance coverage you can possess
  • Liability coverage does not include other protection plans, such as comprehensive car insurance
  • Liability insurance covers three different areas: bodily injury of the other motorist, bodily injury of multiple drivers in the other vehicle, and property damage

Knowing the difference between full coverage car insurance and liability insurance is as important as knowing the rules of the road. Liability will pay for damage you cause to others.

Full coverage often includes collision or comprehensive and will cover damage to your property.

As soon as you are ready to drive, you will hear the golden rule: never drive without car insurance. As you learn more about automobiles and the insurance industry, you will soon realize there are different types of insurance.

Review the details below to help decide what you need and then enter your ZIP above for FREE full coverage car insurance quotes!

What is liability insurance?

It’s required in all 50 states that you have the minimum requirements of insurance protection. This means that it is a crime to drive without basic liability insurance.

Liability insurance is the only policy you will be required to have. Liability insurance is your way of taking responsibility for your actions on the road.

If you damage someone else’s property, you are under obligation to pay for the damages. Since it’s unlikely you have thousands of dollars at your disposal, the only logical thing to do is buy car insurance that covers your liability.

Liability insurance covers three different areas: bodily injury of the other motorist, bodily injury of multiple drivers in the other vehicle, and property damage.

Liability insurance will be listed by numbers; for example, 50/100/25. The highest number represents (in thousands) the maximum that the insurance company will pay for each respective category.

States that require mandatory liability policies have a minimum requirement as to how much liability expense is actually covered. Therefore, 50/100/25 coverage mandates that an injured driver will be paid up to $50,000 for bodily injury, $100,000 for total drivers, and $25,000 for property damage.

Unfortunately, many states are lax on the minimums of car insurance allowable. Some states may only have $15,000 to cover high medical or automobile expenses.

When a person does not have any insurance or does not have enough liability insurance to cover the damages, the other motorist covers it with a policy protecting against uninsured or underinsured motorists.

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What is considered full auto insurance coverage?

Full coverage insurance is not required in any state. This is coverage that protects you and your automobile. If you feel that you do not need collision coverage or comprehensive coverage, then you are not obligated to buy this policy.

This is the most expensive coverage because you are insuring your vehicle and asking the insurance company to pay for the damages you do to your car.

Many motorists are surprised to learn that they can cut their car insurance premiums in half (or perhaps even more) by cutting full coverage from their policy.

They do take on the full risk of their own property damage and medical bills when they do this. However, since they are not obligated to pay more money in premiums, they do get to save a lot of money by the month.

Two Policies with Different Levels of Protection

Though full coverage car insurance is not required by law, most car dealerships and banks will require their financing customers to purchase a comprehensive insurance policy instead of just liability insurance.

Full coverage insurance protects cars against total destruction or flood damage. If you can’t afford to buy a new car, then it’s time to start thinking about a full coverage policy.

If you need help searching for car insurance, use our FREE tool to start comparing full coverage insurance rates!

How to Find Cheap Full Coverage Car Insurance Rates Online

Cheap full coverage auto insurance depends on good driving history and credit. Full coverage auto insurance rates for drivers with a clean driving record can be $75.11/month lower than those with accidents.

  • Full coverage auto insurance offers a lot of protection for your car, including injury, damage and comprehensive coverage
  • Regardless of the plan you choose, you need to read through your policy thoroughly to ensure it offers everything you need
  • Look out for scams from businesses with deals that seem too good to be true

In today’s economy, the majority of drivers are looking for cheap full coverage car insurance. According to recent reports, owning a car costs six percent more than it did a few years ago. Gas prices are one to two dollars more than they were five years ago.

Most people are cutting transportation costs whenever and wherever possible. Corporate giants in the insurance industry have endured tough economic times over the past few years. This has made the industry very competitive.

Compare full coverage car insurance from companies in your area today!

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Cheap Full Coverage Car Insurance Inclusions

Minimum coverage limits for motorists are established by each state. Most insurance companies take driver and car factors into consideration — along with required minimum coverage limits in each state — when determining insurance rates. To issue a rate quote, insurance companies require:

To issue a rate quote, insurance companies require:

  • ZIP code
  • Credit rating
  • Make and model of the vehicle
  • Drivers in the household
  • Driving record
  • Purpose of the vehicle

With these factors and your expressed needs, the insurance company representative quotes the rate. Although full coverage is determined by need, most policies include these basics:

  • Bodily injury liability
  • Personal injury protection
  • Damage liability
  • Collision
  • Comprehensive coverage
  • Uninsured motorist protection

Extra riders and provisions are offered for commercial car insurance policies and individuals for an extra fee. These provisions are not standard inclusions of the original policy. Some of the more common ones are:

  • Rental car replacement
  • 24-hour road assistance
  • Accident forgiveness
  • Decreasing deductible

Cheap Full Coverage Car Insurance Exclusions

It is important to read through your policy once you receive it.

Although the insurance agent gives an overview of the basics of the policy over the phone or internet, there are some exclusions that you should familiarize yourself with.

Many people do not realize they are not covered in certain instances, including:

  • Overlapping policies
  • Civil unrest or road rage
  • Late or unpaid premiums
  • Deliberate acts
  • Uncovered drivers

Drag racing, or using your vehicle for compensation without a license, is a common exclusion.

If you have two policies, each insurer may declare limitations. You may have given a verbal agreement to get your payment in a few days past the grace period and an accident occurs. The insurer could have an exclusion that keeps them from paying your claim.

Car Insurance Scams

You may have come across a couple of the many scams that are on the internet today.

One involves cheap full coverage car insurance carriers who try to attract business from the major insurance companies by offering low down payments for a worthless skeletal policy.

Another involves carriers who claim to offer lower premiums for a full year when in fact you are only covered for ten months.

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How to Shop For Cheap Full Coverage Insurance

In shopping for cheap full coverage car insurance, you have to be careful of businesses that are not solvent. They cannot guarantee payment on your claim although they are accepting your premiums.

Many businesses that are set up on the internet are financially able to offer full replacement value should your car be totaled in an accident.

There are comparison sites online that will allow you to compare several companies at once. A.M. Best and Standard & Poor’s are companies that rate insurance companies as well as other consumer products.

Customizing your policy could be the key to cheap full coverage car insurance.

Discounts on Cheap Full Coverage Car Insurance Carriers

There are several ways to obtain discounts on cheap full coverage car insurance.

One of the more popular ways is to lower your deductible. Another way is to attend safe driver classes. Insurance companies reward good drivers and good credit.

Older cars that are not financed through an institution may be able to forego full coverage and opt for bodily injury liability only, which will make for a cheaper policy.

For the best auto insurance rates, you should shop around for coverage. This will allow you to compare prices from multiple companies and find what works best for you.

What does “full coverage” on a car insurance policy mean?

  • Full coverage insurance does not cover everything in full
  • Includes multiple different types of coverage, including injury, collision, and comprehensive car insurance
  • Medical insurance and personal injury protection are essential for car insurance
  • Underinsured motorist coverage is not usually substantial enough to cover all car accident losses

Full coverage on a car insurance policy typically includes comprehensive and collision insurance, in addition to liability coverage.

Full coverage is a misleading term because the insurance does not cover everything in full.

Full coverage refers to liability, collision, and comprehensive coverage, but every insurance company may have a different definition for it. It does not usually include additional policies, such as medical insurance or uninsured motorist coverage.

Even with liability, collision, and comprehensive, not everything is covered.

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Liability, Collision, & Comprehensive Insurance

Most car insurance companies consider liability, collision, and comprehensive to be full coverage for your car. However, this does not mean that every car part — internal and external — is covered in every claim. Even if you have full coverage, your car is not covered for mechanical failure or fraudulent claims.

Your policy may also have exclusions, such as if your installed car stereo is covered in a break-in, but your laptop may not be.

Liability insurance is insurance for the other party’s car. You only need to submit a liability insurance claim if you are at fault for causing damage to another person’s physical being or personal property. Liability covers damage to a victim’s car/property, and it covers bodily injury or death.

Liability insurance does not cover your medical needs or your own car’s damage. To have coverage for you, you need collision car insurance, which is part of what is referred to as full coverage.

Collision car insurance will cover damage to your car, whether your car was hit or if it hit someone else. Almost any impact is covered by collision, including a bicyclist running into your car. An exception to this coverage is if your vehicle collides with an animal, which is covered by comprehensive insurance.

Comprehensive car insurance covers the majority of non-collision type incidents, such as your car getting struck by lightning or a window getting smashed by vandals.

Since liability only covers the other person’s car, collision and comprehensive are needed to cover damage caused to your car. Thus, buying liability, collision, and comprehensive is often termed full coverage.

Medical Insurance & Personal Injury Protection

Although medical insurance and personal injury protection are not usually considered part of the full coverage, some would say that they are essential for car insurance. Liability covers bodily injury for the people in the other car, but it does not provide you with any medical insurance if you should need it.

If you are at fault for an accident and you suffer from injury as a result of that accident, then you may need medical insurance to cover your medical bills. If you have health insurance and emergency room treatment, then you may not need additional medical coverage.

However, it is worth considering, especially if you don’t have any other means of paying medical bills.

Personal Injury Protection (PIP) is required in no-fault states. No-fault states mandate that everyone carries PIP so that everyone is responsible for their medical bills, thus reducing the amount of frivolous lawsuits that sometimes occur in states where the fault is determined, and blame is assessed.

PIP assures that everyone is responsible for his/her own medical insurance as related to car accidents.

Uninsured Motorist & Underinsured Motorist Coverage

Although liability insurance is required in every state, not everyone abides by the law. Some people drive without car insurance, leaving you at financial risk if they strike you. Uninsured motorist coverage gives you insurance for times when you may be in an accident with someone who is not currently insured.

Underinsured motorist coverage is similar to uninsured motorist coverage, with the exception that the underinsured motorist has some insurance. Underinsured motorist coverage refers to a person who has car insurance but only the bare minimum required by law.

While this insurance offers some liability coverage, it is not usually substantial enough to cover all losses that can occur in an accident. If you are hit by someone who has basic minimum liability and your car is totaled, you may still pay out of pocket for the difference.

There are many optional insurance policies that can be purchased to give you full coverage, but even so, not everything will be covered. To know what is included versus excluded on your policy, review it in fine detail, and ask your agent if you have any uncertainties.

Remember: If you have full coverage on your car insurance policy, then you probably have liability, collision, and comprehensive.

To purchase full coverage, you can request no-obligation rates now from the convenience of your computer with our simple, FREE quote tool!

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Is full coverage car insurance worth the cost?

You may not need full coverage car insurance if the total cost of your rates and deductible is more than the cash value of your vehicle, but you need full car coverage car insurance on new or financed vehicles.

  • Full coverage car insurance includes comprehensive and collision insurance coverage
  • Each coverage option has its own advantages and limitations, so full coverage guarantees you’ll be insured for most situations
  • If you can’t afford a full coverage car insurance policy, consider looking for discounts or opening up a separate savings account to put away funds for your vehicle in the event of an accident or other damaging event

Full coverage car insurance can be great to have and might save you a lot of money in the long run. Although it is a good idea to have it in many situations, it is not the best idea for everyone. In certain circumstances, it is not worthwhile to have full coverage.

For some drivers, having full coverage is a waste of money. Although car insurance is imperative to have, you may be better off having just certain types of coverage. This article will answer questions relating to full coverage insurance and when it may be a good idea not to have it.

What does full coverage car insurance cover?

Full coverage insurance usually refers to comprehensive and collision coverage. It is meant to cover physical vehicle damage that is caused by fire, theft, weather, or animals, as well as damage that results from an accident that you caused.

This extra insurance is above liability insurance. Although states do not require you to have it, it may be required if you lease a car or have financed a new car.

If you have full coverage, it will pay off the balance of your car loan or will pay the car’s market value to you.

If you have more questions about full coverage car insurance or would like more details you can go to the National Association of Insurance Commissioner’s website.

When should you have full coverage auto insurance?

If you have purchased a new car and had to take a loan out for it, your lender will probably require that you have full coverage. If you leased a new car, the company that leased it to you will also more than likely require you to show proof of full coverage.

Even if you paid cash for a new, or fairly new, car, it would be a good idea to have full coverage car insurance.

If you were to be in an accident and did not have full coverage, there is a pretty good chance that you would be responsible for the damage to or the replacement of the car, which would be a lot of money for which you are personally responsible.

Because full coverage pays for the market value, if it is a new car, your insurance company will be able to pay for most, if not all, of a new car for you to replace the damaged one.

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When should you not have full coverage car insurance?

One big thing to consider when deciding whether or not to add full coverage to your car insurance policy is the cost. It is quite pricey to have full coverage on your vehicle.

If you have an older car that is paid off and not worth a lot of money, this may be a good time to cancel your full coverage if you currently have it, or choose not to add it to your policy if you are getting a new policy.

If your car is not worth a lot, the amount your insurance company is responsible for may not be a lot because you need to pay the deductible before the insurance company begins contributing. Once it stops making financial sense to continue to have full coverage, you should not have it.

One way to help you decide whether or not to continue your full coverage policy is to figure out how much your deductible is, as well as the amount you pay for your coverage.

Next, look up the cash value of your car. You can find this in Kelly’s Blue Book.

If what you pay for your premium and deductible is equal to or more than the cash value of your vehicle, it does not make sense financially to continue with full coverage car insurance. Keep in mind that you still need to have at least the basic insurance requirements of the state to be legally able to drive your car.

A better way to protect yourself against damage expenses is to open a separate savings account for your car.

If you decide to cancel your full coverage policy, take the money that you were paying your insurance company and put it into your account instead. This way, if you are in an accident, you will have some money available to help pay for it.

It is easy and convenient to compare car insurance rates for companies in your area — just enter your local ZIP code below!

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

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