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Is it always better to have liability instead of full coverage? This article will help you know which car insurance choice is the best one for your situation.
What Is Liability Coverage?
In order to know when liability is a bad idea, you need to understand what it is. Liability auto insurance covers the other driver if you are at-fault in an accident. Most states require all drivers to have this type of insurance before they can drive on public roads. Naturally, this makes sense. You wouldn’t want someone to hit your car and not pay for the damage or resulting medical bills. That would be horrible! So when that happens, their insurance company has to pay for your restitution.
Why Would I Want More Than Liability?
Being the state minimum requirement, liability is tempting for most people’s first choice. However, there are times when it simply may not be enough coverage. For example, full coverage is what you would want if you are at-fault or there’s a natural disaster. If you are in a hit and run, uninsured coverage would pay to fix your car. Underinsured coverage can take care of you if the other driver’s insurance is insufficient.
In general, insurance is something you hope you’ll never need. Unfortunately, you have to buy it before you need it in order to use it. For example, you can’t add on full coverage insurance the day after you caused an accident to get your car fixed. You have to have it beforehand. People seem to overestimate their driving ability. What’s worse is that, sometimes, another driver causes the accident but you get the blame. This is horrible but know that even not-at-fault accidents can raise your rates.
When Liability Is A Bad Idea
Choosing liability is a bad idea when you or your neighborhood are accident prone. I just recently found out that two of my friends have all had accidents on the same highway where I had my first accident. In at least one of the cases, it was not my friend’s fault. During high school, my father accidentally rear ended a car when the bus in front of the two cars stomped on their breaks at the last second. Sadly, he later ended up junking the car. This all happened just weeks after he switched from full coverage to liability. If he had paid a little extra for just one or two months, he would still have this car 10+ years later.
Liability is a horrible idea when you still own money on your car. Full coverage isusually a requirement of your car loan. Also, can you imagine making your car payment without having a car? If you are somehow ruled at-fault, you may have to take on two car payments. Worse yet, you may not have a way to get to work and still have to make your payment each month.
You may also want to look into getting gap insurance. You can get it either when you purchase your car or with some auto insurance plans. It will pay the difference if you are upside down in your car loan and total your car.
If you are very risk-adverse, don’t get liability. If knowing that hail could damage your car while you sleep will keep you up at night, get full coverage.
Sometimes paying a bit more for piece of mind is worth it. If your car would be expensive to repair after a reck, you might need more than liability. Generally, if your car is less than 10 years old or financed, get full coverage. Otherwise, it may be worth it to go with liability and save the difference. However, Root Insurance gave me such a good rate, I ended up going for full coverage. Check out my review of them!
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.