Picture this: You’re driving home from the grocery store. Traffic is heavy, as expected, but smooth. You roll up to a light that’s close to turning red. You think that if you gun the acceleration, you might be able to make it across your turn before the light changes.
You go for it. Unfortunately, one of the cross-traffic drivers got impatient for their light to change and collided with you. Now you’re one of the six million Americans involved in a car accident.
Full coverage vs liability car insurance: You can’t recall which you have on your car, nor which is better. Fortunately, our guide will help you understand the differences between the two.
What Is Liability Car Insurance?
First, let’s define liability car insurance. A liability car insurance policy pays out to other people for any damage to their property or persons caused by your driving. In states that have mandatory insurance coverage and minimum limits of liability, you need this type of coverage for your car to be road-legal.
To give an example of where liability car insurance is used, let’s take the example from the introduction. If you were judged at fault for the accident and didn’t have liability car insurance, you’d be on the hook for the $7500 repair bill for the other driver’s vehicle. Thus, liability insurance protects you from having your assets seized in the event of an accident, assuming you carry enough.
What Is Full Coverage Car Insurance?
Full coverage car insurance includes liability coverage while also expanding your protections to include comprehensive and collision insurance. Comprehensive insurance coverage takes care of any damage done to your car that you could not prevent yourself, like weather damage or theft. Collision insurance coverage will help absorb the costs of any damage done to your car during a collision with an object or other driver.
So, despite the name, a “full coverage” policy is not something local auto insurance companies advertise for bigger commission checks. Rather, it provides coverage for both vehicles involved in an accident: yours and the other driver’s.
To return to our example from the introduction, a full coverage car insurance policy would pay for not only the damages to the other driver’s vehicle but your damages as well. So, you wouldn’t have to come out of pocket over $1500 on your own repairs, assuming the other driver’s insurance didn’t have to pay for your expenses.
Full Coverage vs Liability Car Insurance: Which Is Better?
Now that you understand what each of these types of car insurance coverage is, you might wonder which is better for you. In order to determine who wins in the battle of full coverage vs liability car insurance, let’s take the following factors into consideration:
Factor One: Cost
As ever, the foremost factor you should consider when choosing between full coverage and liability-only car insurance is the cost. Having car insurance won’t do you any good if you can’t afford the monthly premiums. Full coverage policies are far more expensive than liability ones.
That being said, you should also consider how much it’s worth to you not to come out of pocket for covered damages to your own car. If you’re struggling to afford premiums on a liability-only policy, having to pay for your own repairs could break you. It might be worth it to shop around for another insurance policy where you can afford full coverage.
Factor Two: Value of the Vehicle
Having full coverage on a vehicle gives you exceptional peace of mind. However, as mentioned above, they are quite expensive. If the car is brand new, it might be worth it to have coverage for repairs on the vehicle. On the other hand, if you’ve had the car for decades upon decades, and it’s bound for the scrap heap as soon as it breathes its last, you might not need to keep comprehensive and collision coverage on it.
Factor Three: Can You Afford to Self-Insure?
Another factor that you should consider in deciding the victor of full coverage vs liability car insurance is whether or not you can afford to self-insure. Self-insuring is car insurance lingo for “paying the expenses incurred by yourself”. If you have enough money lying around to afford whatever repairs might be needed after an accident, then you may not need the monthly premiums of a full coverage policy.
For the rest of us, opting for a liability-only policy could leave us footing a bill we can’t afford.
Factor Four: Do You Own Your Car?
All of the above is a moot point if you don’t own your car. The fact is, many car dealerships won’t let you drive off the lot in one of their vehicles without having a full coverage car insurance policy on their records. This is to protect their financial interests, as you’re not likely driving off of their lot with a car you paid for in cash.
Factor Five: Peace of Mind
The last factor you need to consider is how much your peace of mind is worth. Would you rather have to worry about paying out of pocket any time a major storm comes through and hail could damage your car? Or would you rather rest easily, knowing that whatever happens to your vehicle, you have coverage for it?
The choice is yours, but don’t underestimate the value of stress reduction.
Let’s Review the Facts
So, in the battle of full coverage vs liability car insurance, who comes out on top? While full coverage is more expensive than liability car insurance, it protects you in the event of theft and keeps you from having to come out of pocket for covered repair expenses. It also covers you in the event of severe weather damage.
However, only you know the value of your car and your financial situation, so use the information we’ve provided to make the best decision for yourself. And, if you need more information about car insurance or other automotive subjects, check out our blog each day for more content like this!