Before getting behind the wheel of a new car, you need the financial protection that only auto insurance can provide. Navigating through the various coverage options doesn’t have to be difficult, but it can be confusing. Your state’s insurance laws will dictate some of the coverages you must carry, and if you finance or lease a vehicle, the entity that holds the title will most likely require you to carry a full coverage policy. But what’s included in full coverage and when can you drop some coverages for a more affordable policy? Don’t worry, we’re here to help you understand exactly which coverages you need.
What is full coverage insurance?
All states require you to purchase liability coverages and some also require you to carry medical payment or personal injury protection coverages. But state requirements don’t include all the coverages needed to protect your vehicle. A full coverage auto policy includes:
- Bodily injury liability coverage: When you’re at fault for an accident, and the driver or passengers in the other vehicle sustain injuries, your bodily injury liability coverage will help pay their medical expenses
- Property damage liability: If you’re responsible for an auto accident, your property damage liability coverage will help pay to repair or replace another driver’s vehicle, or other types of damaged property
- Collision coverage: If you damage or total your automobile in a traffic accident, collision coverage will help pay to repair or replace it
- Comprehensive coverage: If a car thief steals your vehicle, or it’s damaged or destroyed in a non-collision event, your comprehensive coverage can help pay to repair or replace it
What does full coverage car insurance cover?
All states require you to carry bodily injury and personal property liability coverage. In fact, states set minimum limits on how much liability you must purchase. For example, Pennsylvania requires car owners to carry a minimum of $15,000 in bodily injury coverage to pay the medical expenses of one driver or passenger injured in an accident and $30,000 to cover the injuries of more than one person in one accident, plus $5,000 in property damage insurance.
Oftentimes, state liability limits don’t provide adequate coverage. For instance, the expense of mending a broken leg can cost $7,500 and a three-day hospital stay may cost $30,000, according to the U.S. Centers for Medicare and Medicaid Services. If you’re a Pennsylvania car owner and only carry the state’s required bodily injury liability coverage, you may end up paying loads of money out of your own pocket if you’re at fault for an accident.
Bodily injury liability coverage only pays the medical bills of another driver, his or her passengers or a pedestrian. You can also file a claim against your bodily injury liability coverage if someone sues you for injuries deemed your fault. It doesn’t cover you and your passengers. But, you can purchase medical payments or personal injury protection in some states, which will pay for the injuries of you and your passengers. PIP provides the best protection, because it covers medical expenses, funeral expenses and lost wages. In addition to liability coverages, many states require you to purchase medical payments or PIP coverage.
When you cause an accident, your personal property liability coverage will help pay to repair or replace the other driver’s automobile. It may also cover other types of property, like fences, mailboxes or light poles when you’re at fault for an accident. However, personal property liability does not cover your automobile. If you total your vehicle and only have liability coverage, you’ll have to buy a new car out of your own pocket.
But this is where collision coverage can come to the rescue. Collision coverage pays to repair or replace your vehicle when you’re at fault for an accident. If you total your automobile, most standard collision policies will only pay its actual cash value, a depreciated value.
Vehicles start depreciating the minute you drive off a dealer’s lot, so you can’t count on collision insurance to pay the full cost of replacing a totaled car. Nonetheless, some insurers offer optional replacement cost coverage, which will help you buy a new vehicle at current prices. If you finance a new car, you can also purchase gap insurance, which pays the difference between your totaled vehicle’s actual cash value and the amount you still owe a lender.
Comprehensive coverage covers theft of and non-collision damage and vandalism to your vehicle. If a car thief makes off with your new wheels, a comprehensive policy will help pay the cost to replace it. Or, if a limb falls from a tree during an ice storm and smashes your car’s hood, you can file a claim against your comprehensive coverage to pay for repairs. But, if you crash into another car on the road during an ice storm, you’ll need collision coverage to pay the repair costs of your vehicle.
How much does full coverage cost?
Collision and comprehensive coverages can significantly increase the cost of your auto policy. According to a 2020 Forbes report, U.S. car owners pay an average annual premium of around $567 for liability coverage, $342 for collision and $153 for comprehensive.
The price you’ll pay for full coverage depends on several factors, including your car’s make and model. We requested a full coverage quote from Progressive for a 2020 Ford Escape and received a quote for $450, for a six-month policy. Diving into the details, the quote broke down as follows:
$223 – Personal injury and property damage liability
$199 – Collision
$28 – Comprehensive
We also requested a quote for a 2019 Jaguar I-Pace, an electric vehicle, and received a quote for $743, for a six-month policy, which included:
$257 – Personal injury and property damage liability
$425 – Collision
$61 – Comprehensive
The cost of liability coverage for the two vehicles differed only slightly. Comprehensive coverage costs more for the Jaguar because it’s an expensive luxury car, which poses a higher risk for the insurer if it is damaged or stolen. And, collision coverage for the Jaguar costs more because it’s an electric vehicle, which can cost significantly more to repair if it sustains engine damage.
Is full coverage insurance worth it?
If you finance or lease your car, your leasing agency or lender will most likely require you to carry full coverage insurance. For auto owners who own their vehicles outright, the choice of buying full coverage often comes down to replacement cost.
Older vehicles with lots of miles on the odometer and little resale value don’t need full coverage. Once you make the last car payment, it pays to determine your car’s resale value and consider dropping costly collision and comprehensive coverages.
As a rule of thumb, you should drop collision insurance once your insurance deductible is more than your car’s value. So, if you have a $1,000 collision deductible, but your old automobile has a market value of $900, it no longer makes sense to pay for collision coverage. And, if your insurer isn’t likely to give you a favorable payout if someone steals your car, go ahead and drop comprehensive coverage, too.
Full coverage is always worth the cost if you own an expensive vehicle that you can’t afford to replace on your own. Parents of inexperienced teen drivers might also consider carrying a full-coverage policy, unless their kids drive an old beater with little value.
Motorists who own their vehicles but don’t drive much, like retirees, should consider dropping collision and comprehensive. Likewise, members of the military who own their automobiles might not need full coverage if they’re often called up for long deployments.
Frequently asked questions
What is considered full coverage car insurance?
A full coverage car insurance policy includes bodily injury liability, personal property liability, collision and comprehensive coverages.
Should you have full coverage insurance on an old car?
If you own your car outright and its market value is less than your policy deductible, you don’t need to carry collision and comprehensive coverages.
How much do collision and comprehensive coverages cost?
According to a 2020 report in Forbes, Americans pay an average annual premium of $342 for collision coverage and $153 for comprehensive. However, your rate will vary based on several factors, including the make and model of the vehicle you drive.
Is full coverage required for all cars?
No. States require all drivers to carry liability coverage and some also require uninsured and underinsured motorist coverage, as well as medical payments or personal injury protection coverage. If you own your car, you aren’t required to buy collision and comprehensive coverage. But if you finance or lease an automobile, the lender or leasing company will probably require full coverage.