Car insurance is necessary for all car owners. It protects you from damage and injury costs that you may incur in an accident. In most states, drivers are also legally required to have car insurance before getting behind the wheel. While deciding whether or not to get car insurance is easy (you definitely should get it), choosing between the different types of policy options is a bit more complicated.
The first thing you need to know about car insurance is that there are two main types of coverage. These are liability and full coverage. Liability insurance will cover injuries or damages caused by policyholders to others in an accident.
Full coverage offers liability insurance as well as collision and comprehensive coverage if an accident is caused by another party. There is more to examine when comparing these two types of covers. Understanding the differences between the two will help you to decide which level of coverage to get.
Liability Car Insurance
Most states require drivers to have at least liability car insurance (only New Hampshire and Virginia do not require any insurance). Unlike full car insurance, liability only covers injuries and damages you may cause to another person.
It will not cover any damages caused to you or your car. It may cover damage to someone else’s property. If you hit another car, your liability insurance will cover the damage costs.
Liability coverage has two sections — property damage liability and body injury liability.
Property damage liability covers damages to another person’s property — for example, damage to vehicles or buildings.
Body injury liability covers the costs of the injuries to another person if you caused the accident. Before you proceed to take a sigh of relief, you must understand that the coverage has a maximum limit. Estimates suggest these limits are between $15,000 for an individual and $30,000 for a group of injured individuals.
It’s especially important to not be careless while driving even though you have liability car insurance. Your damages or injuries are not part of the cover in case of an accident.
Full Coverage Car Insurance
Full coverage car insurance covers all damages to the vehicle, both from normal driving and accidents. This type of policy protects you against any accident, including fire, theft, and vandalism. It even covers damage due to neglect, like a tree falling on your car while it’s parked outside your house.
It’s important to understand that full car insurance coverage is in two sections: comprehensive coverage and collision coverage. Comprehensive car insurance covers vandalism, theft, and fire, as mentioned. Collision car insurance covers damages caused to another car or injuries to a person in an accident.
You should note that comprehensive car insurance will only cover damages that equate to the actual cash value of your car. This is the amount after deducting depreciation from your car’s original cost.
Also, when you plan to lease or finance your car, full coverage car insurance may be a requirement. Many lenders will not finance a car that is only under liability coverage. In the case of leasing, full coverage should be your only option. It can be more expensive, but when your car is in the hands of a second party, it’s best to have full coverage car insurance.
Advantages of Liability Car Insurance
Liability insurance is a good choice for people who want to save money but still meet the legal requirements for their state. By choosing this option, you can cut down on car insurance costs. It will allow you to save money while still getting what you need in the way of coverage. On average, liability insurance is 64% cheaper in comparison to full coverage liability.
Also, people may choose liability instead of full coverage car insurance because they have other coverage costs, such as a robust health or life policy. For these people, it can be beneficial to get liability insurance.
Who Will Liability Insurance Benefit the Most?
Liability car insurance is the best choice for drivers who fit into one of five categories:
- Young drivers driving a cheap used car
- Low-risk drivers who have an old car with little value
- New commuters driving less than 25 miles to work per day
- Residents who are at lower risk of getting into accidents
- Drivers who work at home
Advantages of Full Coverage Insurance
There are several advantages of full coverage car insurance over liability. The main benefit is that it covers damage to your own vehicle. Liability does not have this provision. Full coverage also includes liability, which covers damage to other vehicles or injuries to other people when you’re behind the wheel.
Another advantage is that full coverage gives you the option to include family members on your policy even if they do not own a vehicle. Furthermore, there are no limits on coverage under this plan. It means you can go all out to protect your car. This is not the case with liability insurance, which has a maximum limit on what the carrier can cover per claim.
With full coverage, you can expect protection for a stolen car. The same cannot be the case for liability insurance. It is because liability insurance will not cover any costs that may arise from a theft situation.
It’s important to note that full coverage offers protection if you’re in an accident that is not your fault. Liability insurance does not cover accidents caused by someone else other than the insured. Again, this shows the value of full coverage insurance. In the case of full insurance, it will cover individuals and families who own more than one vehicle.
Finally, full coverage car insurance will cover the costs of injuries for people traveling inside your vehicle. This can be an extra benefit if you have family or friends with you when driving around town. Liability covers none of these expenses, which means they would be the responsibility of you, your family, or your friends.
When Should You Get Full Coverage Insurance?
Full coverage is essential when you want to preserve the equity in your car. For instance, when you cause an accident and your car is unrepairable, you can count on collision insurance. At the same time, before you rush to take full coverage, you should consider the value of your car. The value depends on the mileage, age, and wear and tear.
When your car’s value is more than the cost of full coverage, then it is a good decision. But if your vehicle has a lesser value than the cost of full coverage, then you would be better off opting for liability coverage.
Now that you understand full coverage and liability policies, it is up to you to decide which is the best option for you. Both types of coverage have their advantages over the other, but it all depends on your current financial situation, the value of your car, and how often you drive.
