Liability Vs Full Coverage Car Insurance
If you're driving, you're required to purchase auto insurance in most states. Shopping for a policy can be confusing, though. Before choosing an insurance carrier, it's a good idea to have the type of coverage you want in mind.
If you're changing insurance providers, it's important to ask for rates on the specific coverage that you want. Otherwise, you won’t know whether you’re getting a good deal or not.
Learn more about liability versus full coverage and the differences between the two.
What Is Liability Coverage?
If you're liable for something, that means, legally speaking, that you are responsible for the incident. The person found liable is responsible for fixing the resulting damage. In auto insurance, liability coverage helps pay for damage if you're found to be responsible for an accident. This is required coverage in most states.
Auto insurance policies include two types of liability coverage:
- Bodily injury liability: This covers the medical expenses of someone injured in an accident you caused.
- Property damage liability: This covers damage to the other party's property in an accident you caused, including any other vehicles.
Liability coverage is sometimes referred to as BI/PD or PL/PD coverage. BI refers to covering the cost of bodily injuries, PL refers to your personal liability in an accident, and PD refers to covering the costs of property damage. These are the critical components of basic car insurance coverage.
Liability coverage doesn't cover your injuries or property damage to your vehicle. It only covers other parties if you're found liable for an accident.
Liability Coverage Limits
When you purchase an insurance policy, you choose limits for property damage liability, bodily injury liability per person, and bodily injury liability per accident. These are the limits on how much your insurance company will pay. This is usually expressed as a set of three numbers. For example, if you have 50/150/50 coverage, that breaks down to:
- Up to $50,000 in bodily injury liability coverage per person
- Up to $150,000 in bodily injury liability coverage per accident
- Up to $50,000 in property damage liability coverage
While many states set minimum coverage requirements, it's a good idea to talk to your insurance agent about what coverage you should have. If you're found liable in an accident and cause more damage than your limit, you’ll be responsible for the remaining balance.
Let's say you run a red light and plow into the side of a new sports car. Your property damage liability limit is $10,000, but the car is totaled and the replacement cost is $50,000. That means you're responsible for the $40,000 difference.
What Is Full Coverage Car Insurance?
Many use the term "full coverage" to refer to a policy that includes multiple types of coverage. These policy types typically include liability coverage and these additional types of coverage:
- Comprehensive coverage: This covers damage to your vehicle that isn't due to an accident. For example, it covers losses due to theft, vandalism, and storm damage.
- Collision coverage: This covers damage to your vehicle from a collision with another vehicle or an object, like a tree or guardrail.
- Medical coverage or personal injury protection: This covers injuries to yourself and any passengers in your vehicle.
Even if you have these additional types of coverage, you'll still have out-of-pocket costs. You'll be responsible for covering costs until you meet your policy deductibles. You're also responsible for any costs that exceed your coverage limits.
Other Types of Coverage to Consider
Roadside assistance, uninsured and underinsured motorist coverage, gap insurance, towing, OEM endorsements, full glass coverage, and car rental are all types of coverage that you'll need to purchase separately. If you're buying a new vehicle and you haven’t made a substantial down payment, gap coverage is something you should consider (and might even be required to purchase). Gap coverage helps pay the difference between the depreciated value of your vehicle and your loan or lease balance.
Uninsured motorist coverage is also important because it helps to cover accidents caused by an uninsured, underinsured, or hit-and-run driver. Some states require this coverage, but if your state doesn't, it's worth considering.