It’s exciting purchasing a vehicle, but something many people struggle with is finding the right car insurance. Shopping around for car insurance is far from straightforward and it is difficult to determine what type of coverage you may need.
You may consider getting the minimum amount of insurance, the required coverage needed to drive a vehicle in most states. However, there is insurance that covers more and can protect you in various unforeseen circumstances.
The two types of coverage to consider when it comes to car insurance. The first type of coverage is liability. Liability insurance covers the potential cost of damage you may cause in an accident. This could cover the repair costs of another individual’s vehicle or their medical care.
On the other hand, full coverage insurance covers the cost of damage done to your vehicle. Unlike what the name may imply, it does not cover every situation involving you and a car accident.
The best option between liability and full coverage is determined by your situation. This guide will cover the different types of liability and full coverage insurance to help you make an informed decision.
The Different Types of Liability Insurance
Typically, you can find several liability insurance coverage options from your insurance company. Below is a list of the commonly found coverage options available:
- Commercial Auto Insurance
- Professional Liability Insurance
- Business Owners Policy (BOP)
Commercial auto insurance is used to cover company vehicles. This policy is used to potentially cover any gaps in insurance that a person’s individual policy doesn’t cover. Commercial auto insurance gives you additional liability coverage for trucks, transportation vehicles, and other vehicles commonly used to conduct business. This type of coverage is a bit more specific and comes into play when an accident happens on a job site, such as an employee driving into another vehicle.
Professional liability insurance is a policy that covers the costs that come from lawsuits, specifically dealing with professional errors. Things such as being sued for negligence of getting poor advice from a professional are all covered under this policy.
Business owner’s policy insurance is very similar to commercial auto insurance, but it gives additional protection to the business owner’s property. The policy covers things such as merchandise in a store, business equipment, and the expenses that come from business interruption, as well as the costs of someone being injured on business property. An example would be a storm damaging a business owner’s shop and the coverage helping cover the cost of repairs as well as employee compensation.
How Much Liability Insurance Coverage Do You Need?
Since liability coverage is a requirement in most cases, you will have to get it with your vehicle no matter what. The question is how much do you need. States have a legal minimum requirement for coverage, but it is lower than the recommended level.
Keep in mind that if you get into an accident and the costs of the damage exceed your minimum coverage amount, you may be made to cover the rest of the payment yourself.
Before getting a liability insurance policy, take some time to work out how much insurance you can afford and decide based on that. It is difficult to determine how much you will need to look towards the recommended amount as a base before deciding to pay more or less.
Full Coverage Insurance
Compared to liability insurance, full coverage insurance covers two types of situations with its collision and comprehensive insurance options. Collision insurance is generally used to cover the damage involved in situations where you’re driving. If you collide with another car, hit an object, or veer off the road, the insurance covers the damage involved.
However, there are situations where your car is damaged outside of driving situations, which is where your comprehensive insurance comes into play. Comprehensive car insurance covers damages such as theft, fire, or damage caused by extreme weather conditions.
Mandatory Full Coverage
If you lease or finance your vehicle, you are required to get full coverage car insurance. This is because another entity, such as the auto dealership from where you purchased the vehicle or the bank, has an interest in it, they choose how the vehicle is insured, not you.
Generally, companies that deal in auto financing and leasing require comprehensive and collision coverage with very low deductibles.
When you lease your vehicle, you don’t own it, which means you are required to carry coverage to protect the asset as it belongs to another entity. This typically includes full coverage insurance, along with gap insurance.
However, if you own your vehicle, you do have complete control over your insurance. Consider the value of your vehicle as you choose your coverage. Estimators, such as Kelley Blue Book, can assess the value of your vehicle to help you find out how much you need in coverage for your vehicle.
For those new to owning a vehicle, having a vehicle worth more than $4,000 usually means forgoing collision and comprehensive coverage. Without this coverage, you won’t be compensated in events where your vehicle is totaled.
Choosing Between Liability and Full Coverage Insurance
The difference between liability and full coverage is pretty simple. Full coverage applies to the damage done to you and your vehicle. Liability applies to the damage you may cause others or their property while you are driving. In almost every state, you are required to have liability insurance.
On the other hand, full coverage insurance isn’t required, but you may need it. There are a number of factors to consider before getting full coverage auto insurance, but perhaps the most important one is the age of your vehicle.
Cars quickly depreciate in value, which means that the amount you paid for your vehicle will be more than what the insurance company gives you in the event it receives extensive damage.
Before choosing full coverage, it is best to look at how much it costs versus the value of your vehicle. In some instances, especially when your vehicle is closer towards ten years old, it is better to save the money you’d spend on full coverage insurance and use it to repair or replace your vehicle yourself.
Liability vs Full Coverage Insurance Cost
If you choose to get full coverage auto insurance along with your liability insurance, you can expect to a pay significant amount more. In fact, in most cases you can expect to pay well over double the amount you’d pay for the state-required minimum of liability auto insurance.
However, the overall costs of your auto insurance vary wildly based on a number of factors. Below is a list of some of the things that will impact the cost of your insurance and may even lower it.
- Location – Some states have lower insurance costs than others. If you are in a more densely populated area that means you are at a higher risk of having an accident, which increases your insurance costs.
- Age and Gender – Your premium costs will vary based on your gender and age. Younger individuals tend to have a higher rate because they statistically get in more accidents. Older men generally have a better rate than women, but the difference in costs is negligible in most instances.
- Credit Score – Many insurance companies take a look at your credit score when choosing your rate. There is no specific score that starts to affect your rate, but a lower credit score generally means you have to pay higher insurance premiums.
- Profession – If the auto insurance company finds a correlation between your occupation and your risk of accident, they may adjust your premium to reflect it. For example, people who work as delivery drivers are constantly on the road, which means they have a higher likelihood of getting into an accident.
- Type of Vehicle – The type of vehicle you have can raise or lower your insurance premium. If your vehicle has a high safety rating, there is a chance your rates will be lower. The safety rating is based on several factors, such as the likelihood of passenger injury, airbags, seatbelts, and traction control to name a few.
- Driving History – Another factor that increases your rates is your driving history. It’s not just accidents. If you have received a ticket or made previous auto insurance claims, your rates may be higher. Depending on the severity of your driving history, some auto insurance companies will refuse to insure you entirely.
For minimum liability insurance, you can expect to pay anywhere between $150 to over $600 among the major carriers. For full coverage insurance, among major carriers, the average cost for a six-month policy is around $752 or $125 per month. However, this does not factor in the many things that can affect your rate.
In terms of the cheapest full coverage available, a person with a clean record can find affordable full coverage car insurance through USAA, GEICO, and State Farm based on their average rates.
How to Lower Auto Insurance Costs
If you want full coverage but want to lower the costs of full coverage insurance, there are things you can do to make sure you get the best rate. Below are a few ways to lower your rate, even if you don’t have the best driving history.
- Shop Around – Different insurance companies have different rates. Make sure you shop around and see who has the best offer. It’s recommended to get at least three quotes from a company before you choose one. Check to see if your state insurance department has price comparisons for major insurers. Don’t just go on price, speak to others you trust, and find out what insurance companies they recommend.
- Choose the Right Vehicle – If you haven’t purchased your vehicle yet, you can cut your costs significantly by choosing the correct one. Compare the insurance costs of each vehicle. Insurance premiums are based on the cost of the car, the cost to repair it, safety record, and the likelihood of theft. Find what vehicle is right for you that isn’t consider much of a risk.
- Bundle Your Insurance – You can buy your homeowners and auto insurance from the same company. Many insurers give you a break and reduce the overall cost if you get two types of insurance from them. You can also potentially get a lower rate if you insure multiple vehicles under the same company. Consider looking around and seeing if buying from different insurance companies is less expensive than receiving a multipolicy discount.
- Receive Discounts – There are several discounts that insurance companies offer to drivers to help reduce their rates. Some companies offer low mileage discounts for motorists that drive under a certain number of miles each year. For student drivers, they can receive discounts for having good grades, being a college student away from home, or taking drivers ed courses. You can also receive a lower rate for having no accidents or moving violations over a certain period of time. These discounts aren’t always available so speak to a provider to find out what they have to offer.
- Reduce Coverage – If your vehicle is worth less than ten times your premium, consider foregoing full coverage and dropping your collision and comprehensive coverage. Based on the value of your car, it may be worth more for you to set aside money yourself than putting it into insurance.
- Ask for Higher Deductibles – With insurance, deductibles are what you pay before the policy comes into play. By asking for a higher deductible, you can lower your insurance costs significantly. Depending on how much you raise your deductible, you can save over 40 percent on your rates.
It’s important to stay safe and insured when you are out on the road. Not only is it mandatory, but it will also protect you from the significant costs that come with an unfortunate accident. Make sure to thoroughly do your research and shop around before you decide on your auto insurance policy, especially if you are considering full coverage.
If you're considering liability or full coverage car insurance, you might have a few questions. We've developed a few FAQs to help you seek more clarity. Check them out below:
General Liability vs Full Coverage Car Insurance Questions
Here are some general questions about general liability insurance and full coverage. Check them out below:
How do you know if you have liability or full coverage?
If you want to know if you have liability or full coverage, it's best to check your policy for additional information. If you can't figure out what type of insurance you have, make sure to call your insurance company directly.
How do you switch from full coverage to liability?
If you want to change from full coverage to liability, it's best to speak to your insurance company directly. It should only take a few minutes. This is an excellent way to reduce your car insurance rates.
If my friend who has liability insurance drives my car with full coverage, whose insurance will be used in case of an accident?
In most cases, it will be the vehicle owner's insurance that provides the coverage if someone is at fault for an accident. This being said, it's always best to double check with your insurance company before you let a friend drive.
I pay 800 for liability so what would full coverage be?
Unfortunately, you can't determine the amount full coverage will be purely based on your liability coverage. The price is based on a variety of different factors, so make sure to get quotes from multiple providers before you make any decisions.
How to decide to get full coverage or liability insurance?
You need to determine how much you can afford and how much risk you want to avoid. While comprehensive offers much more coverage, it also comes at a higher price. This being said, your lender might require you to have a full coverage policy if you have an auto loan.
What is the difference between full coverage and liability?
The difference between full coverage and liability is the amount of coverage that you have. With liability, you're only covered for damage you do to other vehicles. With full coverage, you have cover for your own car.
When to switch from full coverage to liability?
The amount that you need will depend on your own preferences. If you have an expensive car and you want to protect the value of it, you may want to consider full coverage. But this can cost a lot more money.
How much cheaper is liability than full coverage?
Liability is much cheaper than full coverage, but this can vary significantly. If you want to know how much cheaper your liability coverage is, then it's best to check how much full coverage is by accessing a quote.
How much bodily injury liability should I carry for full coverage?
This is entirely dependent on how much injury coverage is required by the state that you live in. It's a good idea to check with your local DMV to determine how much coverage you need.
What percentage higher should full coverage auto insurance be over liability?
There isn't a specific number in terms of actual cost, but you should make sure that you can afford the difference if you're going to upgrade to full coverage. Make sure to get quotes from multiple providers before you make your decision.
What does the liability part of car insurance cover with full coverage?
If you have full coverage, you will also have liability coverage. This means that you'll also have coverage for the damage that you do to someone else's vehicle. This helps you protect yourself financially when you're driving on the road.
Why does my liability cost more than full coverage?
Your liability coverage should not cost more money than full coverage. If you find that this is happening, you need to call your insurance company as quickly as possible. Make sure to check at other insurance companies if you're currently being overcharged for liability.
What is full coverage current bodily injury liability limits?
This will depend on your policy and the state that you live in. If you need more information about the current bodily injury liabilities, it's a good idea to call your insurance company for more information.
Paying 200 a month full coverage auto insurance how much cheaper for liability?
Unfortunately, you won't be able to determine how much cheaper your insurance coverage is without accessing a quote for a different policy. Make sure to take a look at multiple insurance companies if you want to get the best liability insurance price.
What is full coverage liability?
Full coverage liability is an insurance policy that covers most types of damage to your own car (not just the other car you're in accident with). This means that it will cost much more money than traditional liability insurance. Different full coverage liability insurance policies offer different benefits – make sure to check yours!
Questions About Specific Insurance Companies
If you have questions about liability and full coverage in reference to specific car insurance companies, make sure to check out the FAQs below:
How to know if your Geico insurance is liability or full coverage?
If you have direct access to your Geico policy, you can check it yourself. If you can't find out if your Geico policy is liability or full coverage, it's a good idea to call them for information directly.
How can I change my coverage with Mercury Insurance from liability to full coverage?
If you want to change your policy with Mercury Insurance, it's best to speak to them directly. By calling Mercury Insurance, you should be able to change your policy in just a few minutes.
Where do you see an Allstate app to see if it's full coverage or liability?
You should be able to see information about your policy on the Allstate App. If you can't find out the information you need, it's best to call Allstate directly – they normally answer the phone extremely quickly.
Other Liability vs Full Coverage Car Insurance Questions
If you have any other questions or queries, make sure to check out the FAQs below:
When should I change my car insurance from full coverage to liability according to Dave Ramsey?
There doesn't appear to be a specific amount of coverage that Dave Ramsey recommends in terms of liability vs full coverage. Make sure to check his website regularly for more information.
Liability vs full coverage for a 2009 scion, which one should I get?
This depends on how much coverage you want. At the end of the day, a car that is over a decade old will not have much value, so you might be paying a lot of money for liability. Still, this decision will be up to you.
Why does my insurance card say liability if I have full coverage?
This could be an error, or there could be a specific reason that your card says this. Either way, if you're confused, it's a good idea to contact your car insurance companies directly to clarify the problem.
When is value of vehicle low enough to switch from full coverage to liability only?
This depends on various factors, but you shouldn't have full coverage on a car that is worth less than your deductible. If you have a lot of money saved, and your car isn't worth much money, it might be a good idea to switch to liability only.
Does bodily injury liability apply when you don't have full coverage?
This depends if you have bodily liability coverage. Make sure that you have this type of coverage – it is legally required in most states in the country. Ask your insurer if you're covered for injury liability.
What does full coverage insurance cover on a motorcycle vs liability?
If you have motorcycle full coverage, it will provide much more financial protection than liability, but it will also cost more. The exact amount it costs will vary significantly, so you need to get quotes.
How do you know if someone has full coverage or liability only insurance?
You won't know unless you ask them – if you're someone who is trying to find out about your own type of insurance, it's best to speak to your auto insurance company about your policy.
Why is liability only policy with teen driver high as full coverage on another car?
This will depend on your particular insurance company and the car that you drive. If you think you're paying too much for your current liability coverage, it's always worth getting quotes from other insurance companies.
How do I know when to take full coverage off my vehicle and go to liability only in California?
This depends on a variety of factors, but it is largely up to your own preferences and budget. If your auto lender requires you to have full coverage, you will need to make sure to keep this amount of coverage until your car is paid off.
Should I buy liability or full coverage when purchasing a used car?
This depends on your own appetite for risk. While full coverage might be much more expensive, it does help you protect the full value of your car (it can be worth it if you want to avoid large costs in the future).
What is the law that requires vehicle owners to carry full liability insurance coverage?
This will depend on the state that you're living in. The regulations are on a state-by-state basis. If you're looking to find out if you need liability coverage, and how much you need, make sure to check with your state's DMV.
What if I fail to keep full coverage and just liability on financed car?
This will depend on the stipulations of your auto loan. If your auto loan requires full coverage, your auto loan lender might purchase insurance on your behalf which can be extremely expensive and end up increasing your debt liability. Related: Buying a new car insurance grace period.
How do you know if you need liability for full coverage for your car?
This depends on how much you want to reduce your risk. If you want to make sure you're covered for almost anything, you need to get a comprehensive insurance plan. This being said, your auto lender might require that you have additional coverage – make sure to speak to your lender.