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Liability or Full Coverage?

from Meridian Insurance

by Amy Foster on Jul 8, 2015

Knowing the difference can save or cost you money

Everyone knows that driving with insurance is required. If the bank owns your car then full coverage is the norm. If you hold title to your car then liability insurance, due to cost, will be appealing. Liability coverage will meet the minimum required by law but will often fall short when it is time to make a claim. 

What is Liability Insurance?

The majority of U.S. states have minimum requirements of insurance protection. This means that it is a crime to drive without basic liability insurance. Liability insurance is the only policy you will be required to have. Liability insurance is your way of taking responsibility for your own actions on the road. If you hit someone else, or damage some one else’s property, you are under obligation to pay for the damages. Since it’s unlikely you have thousands of dollars at you disposal the only logical thing to do is buy car insurance that covers your liability.

Liability insurance covers three different areas: bodily injury of the other motorist, bodily injury of multiple drivers in the other vehicle, and property damage. Liability insurance will be listed by numbers; for example, 50/100/25. The highest number represents (in thousands) the maximum that the insurance company will pay for each respective category.

States that require mandatory liability policies have a minimum requirement as to how much liability expense is actually covered. Therefore, 50/100/25 coverage insures that an injured driver will be paid up to $50,000 for bodily injury, $100,000 for total drivers, and $25,000 for property damage. Unfortunately, many states (while stalwart in enforcing car insurance laws) are lax on the minimums of car insurance allowable. Some states may only have $15,000 to cover high medical or automobile expenses—if even that. When a person does not have any insurance or does not have enough liability insurance to cover the damages, the other motorist covers it with a policy protecting against uninsured or underinsured motorists.

What is Full Coverage Insurance?

Full coverage insurance is not required in any state. This is coverage that protects your body and your automobile. If you feel that you do not need collision coverage, or comprehensive coverage (incidental damage to a parked car), then you are not obligated to buy this policy. This is the most expensive coverage because you are insuring your own vehicle and asking the insurance company to pay for the damages you do to your own car.

Many motorists are surprised to learn that they can cut their car insurance premiums in half (or perhaps even more) by cutting full coverage (which is often collision plus comprehensive) from their policy. They do take on the full risk of their own property damage and medical bills when they do this. However, since they are not obligated to pay more money in premiums, they do get to save a lot of money by the month.

Two Policies with Different Levels of Protection

Though full coverage car insurance is not required by law, keep in mind that most car dealerships and banks will require their financing customers to purchase full coverage insurance instead of just liability insurance. This is basically a protection against the total destruction of the vehicle.

When a customer wrecks the vehicle without full coverage insurance, he or she gets no money for the damages and still has an enormous debt to pay off. The car dealer wants his/her money paid as agreed, but how likely is the customer going to deliver that note when he or she will have nothing to show for it? Legally, they are still required to pay.

This illustrates the value of full coverage insurance. Full coverage insurance protects cars against total destruction or flood damage. If you can’t afford to buy a new car from scratch in the event of a massive accident, then it’s time to start thinking about a full coverage policy.

If you need help deciding call us today at 800-207-7079 or request a free auto quote online.

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