Liability vs. Full Coverage Car Insurance: Which Is Right for Me?

Liability insurance is classified into two types: bodily injury and property damage. A basic liability insurance policy includes these two types of coverage. The term "state required insurance" refers to the required minimum amounts of these types of coverage.

Bodily injury

• Bodily injury coverage under liability insurance helps with the medical costs of drivers, passengers, and pedestrians injured in a car accident. This coverage only applies to others and only when you are at fault. It will not reimburse you for any personal medical expenses incurred as a result of the accident.

Property damage

• This section addresses damage to someone else's property, most commonly a vehicle. Assume you are the cause of a car accident. In that case, this portion of your liability insurance will assist in covering the costs of repairing or replacing the other driver's vehicle.

In general, full coverage insurance refers to a combination of two types of insurance. Both collision and comprehensive insurance are included in these policies. Both types deal with property damage, but their specializations do not overlap, making them complementary.

Collision insurance

• Collision insurance covers damages to your car caused by accidents while it is in use, whether caused by a tree or another vehicle. The key point is that the vehicle was being driven at the time of the accident. This insurance does not cover damage to your vehicle while it is not being driven, regardless of the cause.

Comprehensive insurance

• Comprehensive insurance is the inverse of collision insurance. This type of car insurance only covers damages sustained while the vehicle is stationary. A hit-and-run on a parked car, for example, will be covered by comprehensive insurance if it is parked and not in use.

When looking for the right car insurance — which is a legal requirement in most states if you own a car — one of the most common questions is whether you should have liability (or minimum) coverage or a full coverage policy on your vehicle. Liability insurance is typically less expensive, but a full coverage policy will provide more coverage. Which is the correct response?

The short answer is that it depends. Overall, the average national insurance cost is $1,758 per year, so you can expect to pay more if you want full coverage or less if you only want liability insurance.

Liability coverage limits

Coverage limits are specified in almost every insurance policy. These are the maximum amounts that a policy will pay out in the event of a claim. Customers can frequently request higher or lower limits, which will cause their premiums to rise or fall. Except for three states, liability coverage limits for auto insurance must be at a minimum. These limits are represented by insurers in a simple number format: # / # / #.

The first number represents the maximum amount of bodily harm that can be inflicted on a single person in a single accident. The second graph depicts the total bodily injury limit for all people per accident. The third number represents the property damage coverage limit. These three figures represent the various coverage limits of a liability insurance policy. While customers have some control over their coverage limits, certain arrangements are more common than others. One of the more common sets of limits, for example, is 25/50/25. In several states, these are the minimum liability limits for auto insurance. These limits equate to $25,000 for bodily injuries per person, $50,000 for total bodily injury costs, and $25,000 for property damage. Each of these limits applies to a single accident.

Who should get liability coverage?

In general, the older your car, the more likely it is that you can get away with the less expensive liability insurance. Liability insurance only covers damage to the other driver's car in an accident that is your fault (if you are not at fault, the other driver's insurance will cover the costs).

So, who should have liability insurance? People who would benefit from it include the following:

• An 18-year-old teen who drives his father's ten-year-old Ford Fiesta. It doesn't make sense to have full coverage on a car that old, when the repairs would most likely cost more than the car is worth.
• A family with a second car, an eight-year-old Honda Civic that they only use around town. Their primary vehicle, which is two years old, has comprehensive coverage, but having it on the secondary vehicle would be a waste of money.
• Someone on a tight budget who wants to save as much money as possible by trading in their 11-year-old Volvo for a newer vehicle. If they are a careful driver and can put the money they save on insurance toward the purchase of a new vehicle, they can probably get by with minimal liability.

Other factors to consider when deciding whether you should only have liability insurance are how frequently you drive, where you live, and whether your car is primarily stored in a garage. You are less likely to be involved in an accident if you do not drive frequently and keep your car off the road. Furthermore, if you live in a safe neighborhood where your car is unlikely to be vandalized or damaged in any way, you may not require comprehensive coverage.

Who should get comprehensive coverage?

Comprehensive coverage is insurance that protects against additional risks that are not covered by liability. It primarily provides coverage for your own car in the event of an accident. It's not required, but it might be a good idea for you.

So, who should be provided with comprehensive coverage? People who would benefit from it include the following:

• Assume you've just gotten your first brand-new car after driving a junker since you got your license. You want to protect your investment to the greatest extent possible, right? If that's the case, you should pay the extra money for comprehensive coverage so that you're covered if your car is in an accident, even if it's just a one-car slide into a fence post during an ice storm.
• Or if you own a high-priced vehicle, such as a sports car or a top-of-the-line SUV. Again, you want to know that you have coverage that will pay out enough on a claim to repair the car to like-new condition in the event of a mishap, because repairs for this type of car will be costly.
• Comprehensive insurance is also a good idea if you drive frequently — for example, if you travel frequently or drive for work in your own car. The more you drive, the more likely you are to be involved in an accident, so comprehensive coverage may be a good option for you.

If you've spent a significant amount of money on a good car, you probably don't want to have to buy another one anytime soon. If you would be unable to afford another car if your current one was damaged, full coverage insurance is the way to go.

The cost of minimum and full coverage car insurance

Obviously, the monthly cost of liability coverage will be less than that of a full coverage policy. So the real question is whether the additional benefits of the additional coverage are worthwhile.

For me, the question boils down to this: if your car was totaled, could you afford to pay off any remaining debt on it out of pocket while also purchasing a comparable car to replace it?

When you think about it, it's pretty clear that liability works best in some cases and full coverage insurance works best in others.

Your rate will vary greatly depending on the level of coverage you require. Upgrading from liability-only insurance to full coverage typically costs an additional $851 per year. In the table below, you can compare the average rates of full-coverage premiums versus liability-only rates from The Zebra.

If I am on a budget should I consider liability or comprehensive insurance?

The simple answer is “liability,” because your premium payments will be lower with liability than with full coverage insurance. But consider this: if my car is in an accident, can I afford to have it repaired or replaced without relying on insurance?

If the answer is "no," it may be worth considering the additional cost of comprehensive insurance to cover repairs in the event of an accident. Remember that even safe drivers have accidents, and the more you drive, the more likely you are to be involved in one.

So, in the end, if you go with liability, you're betting that you won't have an accident that costs you money because you needed expensive repairs or even a new car if your old one is totaled. You are the only one who can decide which option is best for you.