Liability vs. Full Coverage

As a driver, the law requires that you have car insurance – at least a minimum. Besides, having car insurance also means you are prepared for any unknown loss or damage you may find on the road.

Because it is a basic – car ownership – necessity, shopping for car insurance should be simple and straightforward.

But it is not.

However, many times you have purchased insurance; in order to get the right policy, the more you know about insurance, the better.

There is a lot of information to process about car insurance and a lot to think about. Besides, if you are shopping for car insurance for the first time, there’s a lot to figure out to ensure you get the right deal.

But, many times, terms used in car insurance are confusing and never really mean what you might assume they do.

Liability and full coverage are some of the basic terms of car insurance coverage. But what do they mean? What are their differences? Which one do you need? How much insurance coverage do you need?

Find out more about car insurance and the difference between Liability and Full coverage.

Do You Need Coverage?

Yes, you need coverage. It is a requirement of the law. The question now is not if you need car insurance, but which type of coverage and how much coverage you need.

Since the law requires you to have coverage, there is a set minimum coverage that you must have. That minimum depends on your state.

Liability insurance on a wooden table with glasses.

Often, the minimum coverage you will purchase will include liability insurance because it is the backbone of car insurance and most policies. It covers injury or property damage that you cause with your car – but there’s a lot it does not cover.

To most people trying to figure out “how much car insurance they need,” they may just be deciding between liability coverage and more robust policy.

Ther decision they come by will be of liability insurance with some add ons and combinations that improve coverage such as collision coverage and comprehensive coverage.

What Is Liability Coverage?

Liability coverage is also sometimes called minimum coverage or third-party car insurance. It is the basic and minimum car insurance that the law requires.

Liability insurance comes from the word “liable,” which legally means you are the one responsible for the fault – hence you are responsible for fixing the resulting damage.

In vehicle insurance, liability coverage helps pay for the damage you cause to others or property in an accident.

There are essentially two types of liability insurance:

  • Bodily Injury (BI) Liability.
  • Property Damage (PD) Liability.

Bodily Injury Liability

Covers the associated costs of any bodily injuries you cause to someone with your car. These can include medical costs.

Property Damage Liability

Covers the associated costs of any damage to someone else’s car or property that you cause with your car.

With Liability insurance, your car insurance provider will pay the liability costs to the other party, up to your set policy limits. However, liability coverage is a basic cover and only works when you are at fault.

As a result, there are several other scenarios where you may require more than liability coverage alone.

That is why you need to have more protection with a higher magnitude in your policy.

What Is Full Coverage?

As mentioned, your policy should not just cover a bare minimum. You need to have a robust policy with a higher scope of protection.

That is where full coverage comes in.

Insurance coverage

Minimum car insurance is simple and straightforward. However, the term “full coverage” is a bit of a misnomer. In the real sense, there is no specific type of insurance known as “full coverage” car insurance.

“Full coverage” is used to denote a combination of different car insurance policies including:

  • Liability insurance.
  • Collision insurance, and,
  • Comprehensive insurance.

Liability Insurance

Covers the damage – body injury and property damage – you cause to other people while you are driving your car.

Collision Insurance

Covers the damage to your car caused by accident, regardless of who was at fault. The accident can mean different things such as collision with another car, hitting a pole or object, or driving off the road.

Comprehensive Insurance

Covers damage to your car that occurs when it’s not being driven, such as theft, damage from vandalism, floods, fire, earthquakes, extreme weather, or falling objects like trees.

A sledge hammer embedded in a car windscreen.

The key difference between collision and comprehensive coverages is the difference between the state of the vehicle. For instance, when you are driving the vehicle, it is under collision coverage, while when the car is not being driven, it’s under comprehensive coverage.

In some cases, there are other additions to full coverage, including:

Rental Reimbursement Coverage

Covers the cost of the rental vehicle you will use after your vehicle is involved in an accident.

Roadside Assistance Coverage

Covers the costs of towing and other roadside service costs that you may need after your vehicle is involved in an accident.

Personal Injury Protection

Covers medical bills and other related costs if you or the passengers in your car are injured in an accident.

Gap Insurance

works when you lease your car or owe money on loan for the car, and then it is declared a total loss after an accident. Gap insurance will pay out the difference between what you owe and the value of the car at the time of the accident

Liability vs. Full Coverage: Which One Do you Need?

Liability coverage is a requirement of the law for all drivers or car owners.

As a requirement, it is often a must-have.

Generally, full coverage will offer you much more in terms of coverage. You will get liability coverage, collision coverage, and comprehensive coverage – and, if possible, add other add-on coverages to your policy.

However, full coverage will significantly increase your premium.

There are a few more points to note:

Leased And Financed Cars Require Full Coverage

If you have leased your car or if it is financed, you are required to carry “full coverage” car insurance.

You do not own the car, making the claiming owner – usually an auto dealership or a bank or – to decide how the car is insured.

car keys on a lease agreement

Most car financing or leasing companies require collision and comprehensive coverages, often with low deductibles.

Owned Car: Full Coverage Is Optional

If you own your car, you have the option to decide the type of insurance you will purchase.

Here is an icing tip.

If, for some reason, you are unsure of the type coverage to select, consider your car’s value. The value you give your car will determine how you want it protected.

Remember, without coverage, you would become liable with your out-of-pocket money, and you will not receive compensation if your vehicle is totaled or severely damaged.

Final Thoughts

Car insurance is both a legal requirement and a necessity for a car owner and a driver. You need coverage to feel safe on the road.

However, you have to be careful when choosing your car insurance. You will need car insurance that is both cost-effective and covers more of your needs.

Since the law requires you to have minimum coverage or Liability coverage, you need to think about what to add in your full coverage.