Full Coverage vs. Liability-Only Coverage

When you start the process of purchasing auto insurance, you'll need to decide exactly how much you want to buy. One of the decisions you might be asked is whether you want to purchase full coverage or just liability-only coverage. Depending on your needs, your financial situation and even your comfort level with risk, one might be better than the other for you.

What is Full Coverage Insurance?

You might also know full coverage as comprehensive and collision. In theory, this is two different kinds of insurance (comprehensive insurance coverage, and collision coverage). By getting full coverage, you are purchasing both kinds and are, quite literally, getting a complete insurance portfolio.

Comprehensive coverage protects you for claims and instances other than accidents. This includes theft, fires, damage from Mother Nature and other similar instances. Think of it this way: comprehensive insurance protects you from things outside your control (the weather).

Collision coverage covers what you might think: accidents. You might already have collision coverage and don't know it — if you have an auto loan, you're obligated to purchase it.

What is Liability-Only Insurance?

Just like full-coverage insurance, liability-only insurance also goes by another name. You might be familiar with the term "minimum" insurance. Each state has its own regulations about insurance and how much you must purchase to be legal on the road. This is the "minimum" of minimum insurance. When you buy liability-only coverage, you are literally purchasing the bare minimum necessary to drive legally in your community. This results in an extremely affordable car insurance rate, but a very low amount of coverage.

Depending on where you live, the amount of insurance you have to buy could be quite inexpensive, or it could be fairly costly. It juts depends on state laws. And while the concept of minimum insurance can be quite attractive, it's important that you're aware of the ramifications of it. Let's say you live in a state that requires just $10,000 for property damage liability. You buy minimum coverage. You're in an accident, and are liable for $15,000 in property damage. Guess who pays the remaining $5,000? Yep. You do. It's important to remember that liability-only coverage has very limited benefits. Liability coverage will cover property theft claims in most instances as well. You may also file a property theft claim with your homeowners insurance depending on the situation.

How to Choose the Right Coverage

As you weigh your options between liability only and full-coverage insurance, remember that you need to find out what's best for you. Perhaps you want more than liability only, but don't have the finances for complete comprehensive and collision. Whatever your goals, be sure that you're getting the best coverage for your money. You can verify that you're paying the right amount by getting competitive quotes from several different insurance companies.