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Liability-only vs. full coverage car insurance: how to choose
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- Liability-only car insurance provides coverage for damages you may cause, while full coverage adds coverage for damage to your vehicle.
- Louisiana has the highest premium difference between minimum coverage and full coverage at $2,104 per year. Maine’s difference is the lowest at $716 per year.
- The amount of auto insurance you need depends on your overall financial situation, your comfort level for financial risk and whether your vehicle is financed or leased.
Car insurance isn’t a one-size-fits-all product. In fact, policies can be adjusted to meet your specific needs, even if your needs change. You may have heard the terms “full coverage” and “liability-only” in your car insurance search, but what do these types of auto insurance mean for you? How do you know how much coverage you need? Bankrate can help you understand the differences between these coverage types and how to choose the best option for your situation.
Liability-only vs. full coverage car insurance costs
Carriers analyze many rating factors to determine your car insurance rate. Some of these could include your age, gender, driving history and even your credit history. The type of coverage you choose also significantly impacts how much your premium will be.
You may be wondering, what is liability-only insurance? This type of policy pays for injuries or property damage you may cause in an at-fault accident up to the limits you carry on your policy. Full coverage (which usually includes comprehensive and collision coverage) offers financial protection for your vehicle. Generally, liability-only car insurance is cheaper than full coverage since it provides less financial protection.
Cost by state
The state you live in impacts your auto insurance rates to a high degree. Each state has its own car insurance regulations, crash statistics, crime rates and cost of living variations, which all impact the price of a car insurance policy.
The state you live in substantially impacts your car insurance premium, both for minimum coverage and full coverage. This is due to varying insurance laws, costs of repairs, theft and vandalism rates, and crash statistics. For example, you may pay more for coverage in a densely-populated city because the possibility of heavy traffic patterns may lead to an increased number of accidents, and therefore increased insurance claims. Rural areas, cities with low crime rates and regions with low costs of living typically see lower car insurance rates.
Cost by gender
Women generally pay less for full coverage car insurance due to a lower likelihood of engaging in risky driving behaviors that could result in claims. However, California, Hawaii, Massachusetts, Michigan, North Carolina and Pennsylvania ban the use of gender as a rating factor. In these states, your gender should not affect your car insurance premium.
Additionally, you may find that rates vary more widely based on other rating factors. A 24-year-old woman may pay more than a 40-year-old man since she has fewer years of driving experience. Or, a woman who lives in New York City could pay higher premiums than a man living in rural Iowa. Statistically, she may present a greater risk to her insurance company by living and driving in a highly-congested area.
|Average annual full coverage premium
|Average annual minimum coverage premium
Although men usually pay higher car insurance rates than women, our analysis of average premiums from Quadrant Information Services shows that this gap tends to narrow the older you get. Older men may be less likely to engage in risky driving behavior compared to their younger counterparts. Additionally, the Insurance Institute for Highway Safety (IIHS) shows a decreasing rate of male traffic fatalities in recent decades. The National Highway Traffic Safety Administration (NHTSA) also found that enhanced safety features in new vehicles are helping to lower the risk of dying in a traffic accident for women.
All in all, the trend of equalizing average premiums between genders could boil down to a decreased overall likelihood of being in a fatal accident (regardless of gender).
Cost by insurance company
Every car insurance carrier has its own proprietary way of rating policies, so rates will vary between providers. Finding the best car insurance company for your needs generally involves knowing what coverage amount best suits you, shopping around and comparing quotes. Below, we’ve included average premiums provided by analytics company Quadrant Information Services for some of the largest car insurance companies by market share:
|Average annual full coverage premium
|Average annual minimum coverage premium
Full coverage and minimum coverage costs differ, on average, by roughly $80 or more a month, based on our assessment. However, more robust coverage may be worth the increased cost or may even be a requirement depending on if your vehicle is financed or leased. For many vehicles, the cost of a full coverage car insurance policy is less expensive than paying to replace the car out of pocket following a total loss if you cause an accident or experience theft or severe damage. Supply chain issues, inflation and more complex vehicle technology are driving up the cost of car repairs and replacement in many areas, making a more robust car insurance policy a serious consideration for many drivers.
Liability-only vs. full coverage insurance
Simply put, liability-only car insurance is a type of policy that only provides coverage for damages you cause, not damages you sustain. There are significant differences between liability vs. full coverage. Full coverage builds on liability-only and adds additional coverage, including coverage for damages to your vehicle from collisions as well as non-collision incidents such as storms and fires. In the U.S., the average cost of car insurance for minimum coverage — the lowest coverage level of insurance that you can purchase — is $622 per year, while full coverage costs an average of $2,014 per year.
Keep in mind, though, that your auto insurance needs will likely change over time. You may find that full coverage is the best option for you now, while in the future, you may be more apt to choose liability-only. Reassessing your needs once in a while, especially if you’ve recently gone through a life change, can help you align your coverage with your circumstances. Below, we delve deeper into the differences between liability-only and full coverage to help you determine which is best for you as you gather car insurance quotes.
Liability-only car insurance
Liability car insurance coverage is the part of your policy that pays for the injuries and damages you cause to someone else in an at-fault auto accident. Most states require drivers to carry at least a minimum car insurance coverage limit, often called “minimum coverage.” However, you can buy higher liability limits than required by your state and still have a “liability-only” policy, as long as you don’t add coverage for damage to your vehicle.
Liability coverage is broken down into two parts:
- Bodily injury liability: This coverage pays for the injuries you cause to another party in an at-fault accident.
- Property damage liability: This portion of your liability coverage pays for the damages you cause to another’s property, such as another vehicle, a fence or a building.
Liability coverage is often listed as split limits, which are listed in a bodily injury per person / bodily injury per accident / property damage per accident format. However, your liability coverage may also be a “combined single limit,” meaning it’s one number that can be used flexibly to cover the damages and injuries you cause.
Some states also require other coverage types as part of their minimum coverage requirements, including:
- Personal injury protection (PIP): This coverage pays for your medical bills and your passengers’ medical bills if you are injured in an accident, regardless of fault. PIP may also pay for lost wages and the costs for household services you can’t perform due to injuries. In no-fault states, PIP is required.
- Uninsured and underinsured motorist: These two coverage types pay for injuries you sustain if you are hit by a driver who does not have insurance or does not have enough insurance to cover your bills. This also provides coverage if you are a pedestrian hit by an uninsured motorist or a victim of a hit-and-run accident.
- Medical payments: Although only required in a few states, medical payments coverage is similar to PIP. It pays for your injuries and the injuries to your passengers regardless of fault. However, medical payments coverage does not cover lost wages or household services like PIP.
Takeaway: You must purchase a car insurance policy with at least your state’s minimum required coverage types and limits in states where car insurance is required. However, you can purchase higher liability limits and other coverage types, such as medical payments, and still have a “liability-only” policy.
Full coverage car insurance
Full coverage car insurance refers to a policy that has all the state-required coverage types as well as comprehensive and collision coverage, which add coverage for damage to your vehicle. While it’s possible to have a full coverage policy with low liability limits, many full coverage policies have higher limits for liability coverage to offer more robust coverage and greater financial protection for you and your family.
Full coverage policies include:
- Collision: This coverage pays for your vehicle’s damages from collisions, such as hitting another vehicle, tree or building. Collision coverage will help cover your vehicle’s repairs in a covered claim, regardless of fault.
- Comprehensive: Often called “other-than-collision” coverage, comprehensive pays for non-collision damages, such as damages caused by fire, theft, weather, vandalism or striking an animal.
You may also be able to add some additional coverage types, known as endorsements, to full coverage policies:
- Rental reimbursement: This coverage will pay for a rental car if your vehicle is not driveable and is being repaired or replaced by a claim covered under your comprehensive or collision coverage. There is generally a per-day coverage limit and a total maximum amount of coverage limit.
- Roadside assistance: This endorsement pays for service calls needed for your vehicle, like a tow, jump start or tire repair service.
- Gap insurance: Gap coverage is designed to pay the difference between your new car’s actual cash value and the amount you owe on a loan or lease. If your vehicle is totaled or stolen and you owe more than the car is worth, gap coverage pays the difference.
Takeaway: A full coverage policy is generally more expensive than a liability-only policy, but it provides more financial protection and often has higher liability limits. Full coverage is often required when a vehicle is financed or leased. Additionally, you must have full coverage to qualify for several common endorsements, including car rental coverage and roadside assistance.
Do I need liability-only or full coverage car insurance?
Deciding how much car insurance you need is pivotal in finding the right policy for you. Too little coverage could leave you with high out-of-pocket bills in the event of an accident and face financial strain. Too much coverage, and your budget may be strained by your premium payment. So, how do you know how much coverage is right for you?
First, if you have a loan or lease on your vehicle, you’ll likely be required to buy full coverage as a condition of the financing, which could be an easy way to narrow down your options. If you own your vehicle outright, you can choose between liability-only and full coverage policies. If your vehicle is older or you otherwise feel that you have enough money to pay for damages out of pocket, you may want to choose liability-only. However, if paying for vehicle damages out of pocket would cause you and your family financial distress, full coverage may be the better option.
Most insurance professionals recommend you consider buying higher liability coverage limits than your state’s minimum, even if you choose not to have comprehensive and collision coverage on your vehicle. Higher liability limits mean greater financial protection for you and your family in an at-fault accident. If you are unsure how to determine the right coverage amount, you always have the option of working with a licensed insurance agent for more guidance.
Frequently asked questions
Bankrate utilizes Quadrant Information Services to analyze 2023 rates for ZIP codes and carriers in all 50 states and Washington, D.C. Rates are weighted based on the population density in each geographic region. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:
- $100,000 bodily injury liability per person
- $300,000 bodily injury liability per accident
- $50,000 property damage liability per accident
- $100,000 uninsured motorist bodily injury per person
- $300,000 uninsured motorist bodily injury per accident
- $500 collision deductible
- $500 comprehensive deductible
To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2021 Toyota Camry, commute five days a week and drive 12,000 miles annually.
These are sample rates and should only be used for comparative purposes.