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One of the biggest questions you will be asked while shopping for car insurance is wither you want liability or full coverage. This article will help you answer that question and make an informed decision for yourself.
Let’s Start With Liability Coverage
As the name suggests, liability covers the damage that you do to another driver. Not only does this save you from having to pay to fix someone’s car, it also covers their medical bills, up to a certain limit. The main reason people get liability insurance is actually because it is usually a requirement to legally drive. In several states, it is actually a felony to drive without car insurance. These states may put you in jail for driving for a day without current insurance.
Most other states will issue a ticket if you are caught driving without insurance. Either way, either of these actions will be on your driving record for years and increase the price when you actually get insurance again.
Many people opt for liability because it is the cheapest option to legally drive. Since no one really wants car insurance, they want to choose the cheapest option. However, if you are ever at-fault in an accident, liability won’t do anything for you. They won’t fix your car, and, depending on the state, may not cover any of your medical bills.
What Is Full Coverage?
Full coverage car insurance is collision and comprehensive coverage in addition to liability coverage. It usually ends up being about twice the price of only liability. Side note: some states also require personal injury protection. Collision insurance is for if you are in an accident and it is deemed your fault.
It is import to know that even some accidents you did not cause may list you as the driver at-fault. In those cases, you would either have to pay out-of-pocket to repair your car or buy a new one yourself. Since this can be a costly coverage for an insurance company, collision is usually one of the most expensive coverage options.
Usually, comprehensive must accompany collision coverage. This way, if there is wind, hail or other damages, the insurance company will pay to fix your car. It usually ends up adding less to the bill than collision but most carriers will not let you have one coverage without the other. With both, you can rest assured that no matter what happens, you should be able to have your car repaired.
Do I Need Full Coverage?
Great question! The easy answer is that if you have a car payment, you need full coverage. However, this question becomes harder after you pay off your car. Generally, if your car is under 10 years old or you live in an area with a lot of careless drivers, I would opt for full coverage. If your car would cost a lot to replace, get the full coverage.
If it ends up being only a few dollars more a month, get full coverage. I literally sleep better at night knowing that, even if I reck my car, I can have it fixed or replaced. Since I usually don’t have an extra $10,000 to spare, I have found the extra cost to be worth it.
Why Do I Need Full Coverage If My Car Is Financed?
Unfortunately, most car financiers require full coverage. Since newer cars are usually more expensive to insure, adding on full coverage makes your expenses go up even more. The reason is so that if you are in an accident, they won’t be left empty handed if you no longer make payments.
It never hurts to double check with the finance company before getting insurance. Generally, your premium will go down as the car deprecates in value. In fact, sometimes it makes more sense to buy an older car just to save money on your car insurance.
Is My Old Car Worth It?
If your car is old or worth less than about $3,000-5,000 I would opt for liability only. You can save up the money you save each month toward a downpayment on a new car. Let’s say you save $75 a month by opting for the state minimum requirements. Over a year with an accident, that’s $900!
However, be careful that you actually save up the difference in cost. I would recommend using a separate checking or savings account to stay off the temptation to spend the extra money. Human nature is to spend more money as we see more in our checking account. The last thing you want to happen is to get liability to save money and then spend it all on something else.
If you only have liability and are in an at-fault accident, you won’t have a car. Without enough money for a new downpayment, you may be in a tough situation.
When Is It Worth It To Add Full Coverage?
Despite the above information, sometimes it makes sense to get full coverage. This is only when the difference in price is smaller enough to justify adding it on. With Root Insurance, I found that it barely added $10 a month to my bill. For piece of mind, my wife and I elected to add it on. For us, it was worth it to spend a bit more but not worry when we drive in the snow. However, if it were twice as expensive to add full coverage, we would have stuck to liability. Root is the only company I have seen who made it that close in price for full coverage.
Be sure to check out my full Root review right here!
So now you should know the difference between full coverage and liability insurance. Liability coverage is usually the only requirement for car insurance but it does vary from state to state. You will want to verify those requirements. If you have any questions, feel free to drop a comment below. Have you ever been glad you had full coverage after an accident?
Adam is a license Property and Casualty Insurance Agent for over two years in 25 States. He has worked with 10 different insurances companies. His interests include marketing, insurance, sales, and personal finance.
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