Understanding auto insurance coverage can prove to be very complicated for the average Joe.
Insurers consistently create and market new products under various names in order to get a leg up on their competition.
But what about good ole’ “full coverage?” What exactly does it mean and is it enough to ensure you’re fully protected?
Both good questions. So let’s clear things up a bit.
Full Coverage Basics
The basic personal auto insurance policy is broken down into two main types of coverage, liability and physical damage.
You are said to have “full coverage” when you purchase both for any one vehicle.
Tip: It is possible to have full coverage on one vehicle and liability-only on a different vehicle on the same policy. However, the limits of liability you choose are the same for every vehicle on an auto policy.
By the way, each of these coverage types can be broken down into a few other coverage types on top of that. But more on that in a minute.
Part 1: Liability Coverage
Simply put, liability coverage is designed to “pay back” people you have physically injured OR to fix or replace OTHER PEOPLE’S property that you damaged.
For example, if you have liability-only insurance and cause an accident that injures someone else and damages their car, your insurance company will pay for the damages up to you policy liability limits.
Uninsured and Underinsured Motorist –Liability Coverage
UM and UIM are considered a liability coverage part on the personal auto insurance policy…even though you, as the insured, are not at-fault for damages.
Basically, your insurer is agreeing to be “liable” to you for bodily injury and property damage you suffer as a result of third-party’s negligence – who either has no insurance, doesn’t have high enough liability limits to cover the damage they cause, or simply hit-and-ran!
Part 2: Physical Damage Coverage
At the same time, purchasing liability-only coverage would not pay for any damage you cause to your own car. So without the physical damage coverage part added to your policy, you’d be out of luck.
This is where “full coverage” comes into play. You would need to purchase physical damage coverage in addition to your liability coverage in order to repair your own vehicle in the event it is damaged by you or an act of God.
Note: If someone else causes an accident that damages your car, their liability insurance would pay to repair or replace it.
So take the time to break it all down to ensure you fully understand the coverage afforded.
Final Word on Full Coverage
There is no universally agreed upon definition for “full coverage.” At the end of the day, most will say that having liability and physical damage coverage on a vehicle is said to be full coverage.
However, there may still be benefits to paying for additional coverage types to your policy to ensure you’re properly covered.
You may choose to add Personal Injury Protection, Medical Payments coverage, Auto Death Indemnity, Gap coverage…and so on, depending on your unique auto insurance needs.