| Liability Car Insurance | Full-Coverage Car Insurance | |
|---|---|---|
| Typically Covers | • Other driver’s bodily injuries • Other people’s car or property damage you cause | • Other driver’s bodily injuries • Property damage you cause to others • Damage to your car from collision and non-collision sources |
| Limits | Meets minimum state-required coverage limits | May have higher coverage limits for liability coverage; collision and comprehensive limits based on the car’s actual value |
| Average Cost (annual) | $631 | $1,176 |
| Mandatory | In most states | Only when you finance or lease a vehicle; some jobs may also require full-coverage car insurance |
| Deductible | None | A deductible is due when filing a claim on a collision or comprehensive policy claim, ranging from $100 to $2,000; the deductible may be set by your lender. |
| Recommended | Always | If: • You have an auto loan • Your car is high-value • You don’t want to pay repair costs out of pocket • You’re likely to file a claim for damage • You want extra coverage |
Liability Car Insurance
Liability car insurance is designed to help cover the costs if you’re at fault in an accident that causes others to suffer bodily injuries or property damages.
What Is Covered
Liability insurance includes two coverage types:
- Bodily injury liability coverage: Covers when you’ve caused an accident that resulted in an injured person’s or multiple people’s medical bills, loss of income, legal fees if you’re sued, and pain and suffering.
- Property damage liability coverage: Covers when you’ve caused an accident that resulted in costs requiring repair or replacement of damaged property, such as a person’s vehicle or mailbox. It can also cover your legal defense if you’re sued.
Auto insurance providers set coverage limits on each liability coverage type. Bodily injury limits rely on a per-person and per-accident basis. If damages from an accident exceed your limits, then you’ll be responsible for the difference.
In insurance, indemnity results from your insurance contract stating that your insurer agrees to pay for your damages or losses in exchange for your premium.
What Is Not Covered
Your liability car insurance policy won’t cover:
- Costs if you or someone in your vehicle gets hurt
- Repairing your car due to an accident that’s your fault
- Uninsured or underinsured drivers damaging your car
- Claims that are higher than your insurance liability limit
Price
The liability car insurance cost depends on location, driving record, age, and claims history. The average premium for liability coverage nationwide was $631, or about $52 per month, in 2020, according to a National Association of Insurance Commissioners (NAIC) report published in 2023.
Is It Required?
Liability car insurance coverage or an equivalent is required in 48 U.S. states, although the necessary amounts and coverage types vary. There are two exceptions:
- In New Hampshire, you don’t have to carry coverage, but you must be able to prove that you have sufficient funds to meet the minimum financial responsibility requirements.
- In Virginia, you can pay an uninsured motor vehicle fee of $500 per year instead of carrying the minimum required liability coverage.
Full-Coverage Car Insurance
While there’s no legal definition of “full-coverage car insurance,” this phrase usually refers to an auto policy that includes a state’s required coverage plus comprehensive and collision coverage. In some cases, full-coverage auto insurance may also mean higher limits than the minimum required by law or other insurance package types.
Each insurance company may define “full coverage” differently, with varying options by state. Ensure that you know what you’re buying, and what your policy does not include. Ask for details on coverages included and the limits for each coverage type.
What Is Covered
Your lender will likely require full-coverage car insurance when you take out a car loan, but it’s not a policy type offered by insurers. Instead, “full coverage” usually means you need to purchase liability coverage along with these two coverage types:
- Collision car insurance coverage: Collision coverage helps to cover the cost of repairing or replacing your vehicle if you’re involved in an accident alone, with another car, or with a stationary object like a light pole.
- Comprehensive car insurance coverage: Comprehensive car insurance coverage helps cover vehicle damage costs resulting from non-collision causes. Examples include damage from floods, fires, animals, theft, and falling tree branches.
Together, collision and comprehensive policies help to cover the costs of repairing or replacing your vehicle in most scenarios. Based on your state or insurer, full coverage for a consumer could also include:
- Higher limits than the state minimum for bodily injury and physical damage liability coverage
- Personal injury protection (PIP) insurance or medical payments insurance for your or your passengers’ accident-related injuries
- Uninsured or underinsured motorist (UM/UIM) coverage to protect your vehicle from hit-and-runs and drivers without adequate insurance
- Other coverage. You can add towing, roadside assistance, pet coverage, rental car, and gap coverage to cover the difference between your loan or lease amount and any insurance payout.
What Is Not Covered
Full-coverage packages vary by the issuing company, so ask what is and is not included in the policy. There isn’t a universal full-coverage policy that covers every possible risk or situation. For example, your policy will likely contain exclusions that could lead to a claim denial—such as using your car for ride-sharing.
Price
Like liability coverage, the price of full-coverage car insurance also depends on various factors. The average annual premium nationwide is $1,176, or $98 per month, according to the latest data from the NAIC.
To find the best deal, it’s best to shop around and get quotes from a few reputable insurers.
Is It Required?
No state requires full-coverage car insurance, but it may be necessary in the following situations:
- Bank or lender: Your lender may require you to carry collision and comprehensive coverage until your vehicle is paid off.
- Leasing agency: If you leased a vehicle, you might be required to carry collision and comprehensive coverage until your lease is up.
- Employers: Some employers may require job applicants to have full-coverage auto insurance.
If you encounter a requirement to get full-coverage auto insurance, get details on the coverage types, deductibles, and amounts required. You may also be required to have a deductible below a certain amount, such as $1,000 or $2,000.
If you don’t buy the insurance required, your lender may buy it for you and charge you for doing so through increased premiums.
Liability vs. Full-Coverage Car Insurance: Which Should You Choose?
Here are five key factors to consider when deciding between liability and full-coverage car insurance:
Mandatory Requirements
Check your state’s or lender’s insurance coverage requirements. States require liability coverage. Lenders require full coverage—and sometimes specific deductibles. But once your vehicle is paid off, then the need for full coverage and deductible amounts will depend on your situation and preferences. And remember, collision and comprehensive coverage are separate policies. You can add one or the other if you don’t need both.
Risks and Risk Tolerance
When you have a higher collision risk, it’s more important to have a variety of coverage. Consider your risks with your:
- Accident and claim history
- Driving frequency
- Regular driving routes
- Exposure to potential theft
- Non-collision causes like animals, falling tree branches, floods, or fires
Would you rather be safe than sorry with full coverage, or take the risk and save upfront on your premiums with just liability? If you’ve had to file comprehensive claims in the past, you may want to keep that coverage in place.
Premiums
Auto insurers charge different premiums for liability vs. full-coverage car insurance. You’ll pay more every month—about twice as much, on average—for full coverage. But you will get more protection against unexpected vehicle damage. You’ll generally pay higher full-coverage premiums for more expensive cars, frequently stolen vehicles, and cars that cost more to repair.
Limits
You can choose your liability limits. For a full-coverage car insurance policy, you could increase your liability limits to a higher amount. But the car’s actual value determines amounts for comprehensive and collision coverage—you can’t choose the limit.
Car Value
Your car’s value is also a factor. Think about whether the settlement would justify the insurance costs if your vehicle was totaled. If your car was damaged, would you prefer to pay out of pocket for repairs or replace it without an insurance settlement? Full coverage is often more valuable for newer, higher-value vehicles.
Does Liability Insurance Cover My Car If I Have an Accident?
Your liability insurance won’t cover the cost to repair or replace your car if it’s damaged in an accident. That said, if the other driver is at fault, their liability coverage would cover damages to your vehicle up to their policy’s limits.
Does Full Coverage Cover At-Fault Accidents?
Full-coverage car insurance does cover the cost to repair or replace your vehicle if you damage it in an accident that is your fault (up to your policy’s coverage limits). However, if you or your passengers suffer bodily injuries, full-coverage insurance alone wouldn’t cover the medical bills and other associated costs unless you have personal injury protection (PIP) or medical payments coverage.
When Should I Drop Full Coverage?
You can drop full coverage once you’ve paid off your vehicle. It can make sense to do so when the costs outweigh the benefits, such as if repair costs are more than your car is worth or if your driving history indicates you have a low claim-filing risk. Remember, you must then pay all repair or replacement costs out of pocket.
The Bottom Line
Liability car insurance is a must-have in most scenarios. It is typically required by law, affordable, and helps to protect you and others in case of an accident. Full coverage, on the other hand, may not always be necessary.
If you own your vehicle outright, it could make sense to skip full coverage if you don’t drive much or haven’t filed a claim in many years. It can also make sense if you’re comfortable paying for necessary repairs out of pocket, if your vehicle’s value doesn’t justify the coverage costs, or if you don’t need other types of coverage.
