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Finding the perfect car insurance for you requires you to understand the different types of coverage options and how much you need. One of the first decisions when it comes to purchasing car insurance is figuring out whether you want minimum liability vs. full coverage car insurance. Learn the difference and which type of coverage is right for you using our guide.
- Minimum liability insurance covers the cost of damages to others while full coverage offers protection to both your own liability and property damages to your personal vehicle.
- Most states have minimum liability requirements for car insurance, but what level of coverage you need depends on several factors.
- Use this State-by-State Guide to Minimum Liability Coverage to know what your requirements are.
What is Car Insurance?
Car insurance is basically a contract between the insurer and policyholder. In exchange for monthly payments, otherwise known as premiums, car insurance agencies offer protection to customers and their vehicles. Granted this transaction occurs under certain terms and conditions outlined in the policy.
Minimum Liability Coverage Definition
Protection against damages to other vehicles or injuries to other people if involved in an accident falls under minimum liability coverage. In most states, liability coverage is mandated. As it covers the costs of damages and injuries to others in the accident, it does not however, cover injuries or damages to the policyholder. For this reason, liability coverage is divided into two different categories: bodily injury and property damage.
Under bodily injury coverage all costs pertaining to the other person’s injuries, if you are at fault for the accident, are covered up to the policy limits. Policy limits include the maximum amount paid per person injured in an accident and the maximum amount paid for the entire accident. For instance, a policy might limit protection to $15,000 per individual injured and $30,000 for all injured people.
Meanwhile, property damage liability coverage pays for all damages to other vehicles or property involved in an accident when the policyholder is at fault. The limit for this policy is listed as a single dollar amount. This translates to the maximum payout per accident. It does not cover damages to your vehicle.
Even in states where car insurance is not required, it is highly recommended to purchase some type of coverage. Otherwise, you are financially responsible for injuries and property damages that result from an accident.
Full Coverage Definition
That doesn’t necessarily mean you are provided with all the perks associated with car insurance with full coverage. This type of coverage refers mostly to policies that include liability coverage in addition to collision and comprehensive insurance.
Collision insurance protects you against situations where you are driving and another driver or object damages your vehicle. It doesn’t matter who is at fault; collision coverage will assist the policyholder in their time of need. It is essential to know that collision coverage is not offered independently but instead purchased with comprehensive insurance.
When it comes to repairs and non-collision accidents, like theft, vandalism, damage from weather, natural disasters, falling objects, and animals, comprehensive insurance has you protected. Both collision and comprehensive insurance cover the costs of damages to your car up to the actual cash value. The amount your vehicle is worth after subtracting depreciation costs from the original purchase price is considered actual cash value.
Although full coverage is not mandated in all states, the lender often requires it if leasing or financing a car. With both collision and comprehensive coverage, policyholders are responsible for covering the cost of the deductible. It typically ranges from $250-$1,000.
Minimum Liability vs. Full Coverage
Deciding between minimum liability vs. full coverage car insurance will require you to determine if comprehensive and collision coverage will benefit you. Keep in mind; full coverage policies are already included in liability insurance.
|Type of Coverage
|What It Covers
|Property Damage LiabilityBodily Injury Liability
|Comprehensive CoverageCollision CoverageProperty Damage LiabilityBodily Injury Liability
|Average Annual Cost
|Is it Required by Law?
|Is it Required to Lease or Finance a Car?
Who is Minimum Liability Coverage Best for?
All drivers need minimum liability coverage. Every car insurance policy includes liability coverage and is required in all states except Alaska, New Hampshire, and Virginia. Depending on what state you live in will determine what kind of minimum coverage levels must be met. Minimum liability insurance is set forth to protect drivers who are not at fault in an accident.
Who is Full Coverage Best for?
If a policyholder has a luxury vehicle or makes payments on your car, full coverage helps pay for repairs from an at-fault accident. Full coverage protects against theft, vandalism, weather damage, and other scenarios.
|Type of Coverage
|You’re on a budget but need to meet minimum insurance requirements to drive legally
|Your car is very old or in poor shape, and full coverage would cost more than 10% of your vehicle’s worth
|Out-of-pocket expenses for repairs or replacement value are more expensive than you can afford and more expensive than the cost of the premium for full coverage
|Your car is new, leased, financed, or very expensive (like sports or classic car)
|Minimum Liability and Full Coverage
Best Car Insurance Providers
- Best For:AARP members at least 50 years oldRating:
Driving with Confidence
To ensure that you are adequately protected against injuries, financial stress, and property damages, you want to purchase the best and most appropriate car insurance for you. Always analyze your current situation and compare quotes from different agencies to determine what insurance policy is suited for you. Talk to an agent for the most accurate and up-to-date information.
Frequently Asked Questions
Is full coverage car insurance worth it?
Whenever a car is worth more than the combined cost of a full coverage policy and deductible, full coverage is most definitely worth it. If, for example, your car is worth $25,000 and involved in an accident. If totaled, collision insurance would cover the full $25,000 of your vehicle, excluding your deductible.
If you do not have collision insurance, you end up losing the equity of the car. Full coverage costs drivers roughly $1,000 per year, so anyone who owns a valuable vehicle can save themselves some money.
If your vehicle is less than the cost of full coverage, you should consider only choosing liability protection. Your premium will be significantly lower. Whenever a car is worth less than $4,000, it makes more sense to invest in minimum liability insurance.
Does minimum liability insurance cover theft?
Minimum liability insurance does not cover theft if your car is stolen. In addition, you must have comprehensive insurance at the time of the incident if you are looking to file a theft claim.