Difference Between Liability and Full Coverage Insurance: A Simple Guide for Drivers in the USA
The terms liability insurance and full coverage insurance are likely familiar to you when discussing auto insurance in the United States. You’re not alone if you’re unsure of what each implies or which one is best for you. A lot of drivers are perplexed by these kinds of coverage and how they operate.
To help you make an informed choice regarding your auto insurance policy, we’ll break down the distinction between liability and full coverage insurance in simple terms in this post.
What Is Liability Insurance?
The most fundamental kind of auto insurance coverage is liability insurance. In practically all US states, it is mandated by law. If you cause an accident, this coverage helps cover other people’s costs. To put it another way, it safeguards others, not you.
Liability insurance consists of two primary components:
- In the event that you cause an accident that injures another person, bodily injury liability (BIL) covers medical costs, lost income, and occasionally legal expenditures.
- If you are at fault in an accident, property damage liability (PDL) covers the cost of replacing or repairing another person’s property, such as their building, fence, or automobile.
For instance:
Your liability insurance would assist in covering the cost of the other person’s auto repairs and, if necessary, their medical expenses if you were to rear-end them at a stoplight.
- It’s important to understand that damage to your own vehicle is not covered by liability insurance.
- Additionally, it won’t cover your personal medical costs following an accident that you caused.
What Is Full Coverage Insurance?
Full coverage insurance is a collection of many insurance protections packaged together rather than a single policy type. Usually, it consists of:
- Liability insurance (as already mentioned)
- Collision Coverage: Covers auto repairs in the event of an accident, regardless of who is at fault.
- Damage to your vehicle from non-collision incidents such as theft, vandalism, fire, falling items, natural disasters, or collisions with animals is covered by comprehensive coverage.
For instance,
collision coverage would cover the cost of fixing your vehicle if you hit a tree after sliding on an ice road. Comprehensive coverage would pay for those costs in the event that your parked automobile is damaged by a storm or stolen.
Important to Know:
- Comprehensive coverage offers both you and your car more comprehensive protection.
- Lenders frequently demand it if you have a vehicle loan or lease.
- Although it costs more than liability-only insurance, it provides comfort.
Key Differences Between Liability and Full Coverage Insurance
Let’s break down the main differences between liability and full coverage insurance in a simple chart:
| Feature | Liability Insurance | Full Coverage Insurance |
|---|---|---|
| Covers Damage to Your Car | ❌ No | ✅ Yes (with collision and comprehensive coverage) |
| Covers Damage to Other Cars/Property | ✅ Yes | ✅ Yes |
| Covers Medical Bills for Others if You’re at Fault | ✅ Yes | ✅ Yes |
| Covers Your Medical Bills if You’re at Fault | ❌ No (unless you add extra coverage) | ✅ Sometimes, depending on your policy and state regulations |
| Required by Law | ✅ Yes in most states | ❌ No (unless you’re financing or leasing your car) |
| Cost | 💲 Lower premium | 💲💲 Higher premium |
Which One Should You Choose?
Your personal circumstances, such as your financial status, the value of your vehicle, and your tolerance for risk, will determine whether you choose liability insurance or full coverage insurance.
- Only if you own an older vehicle with a low market value might you decide to get liability insurance.
- Your goal is to pay less each month for your insurance.
- If something goes wrong with your car, you’re prepared to pay for repairs or a replacement out of pocket.
- If you own an expensive or newer vehicle, you may decide to get full coverage insurance.
You have a car loan or lease (full coverage is required by most lenders).
- Knowing that your vehicle is protected in practically every circumstance gives you piece of mind.
- You reside in a region that experiences severe weather, high accident rates, or auto theft.
How Much Does Each Cost?
In the USA, liability-only insurance is typically far less expensive than full coverage insurance. Recent national data indicates that:
- The annual cost of liability insurance ranges from $600 to $800.
- The annual cost of full coverage insurance ranges from $1,600 to $2,000.
But the real cost is determined by things like:
- Your driving history and age.
- where you reside.
- Your car’s manufacturer and model.
- The level of coverage you select.
- The amount of your deductible (the larger the deductible, the lower your premium).
Final Thoughts
Being a prudent driver in the United States requires knowing the difference between full coverage and liability insurance.
- In most areas, liability insurance is the bare minimum required by law to protect others in the event that you cause an accident.
- More comprehensive protection is provided by full coverage insurance, which covers both your own car and other people’s costs.
The value of your car, your financial status, and your tolerance for risk should all be taken into consideration when choosing one. Finding the greatest bargain can also be aided by obtaining quotations from other insurance providers.
Ultimately, having the appropriate auto insurance coverage should provide you with the peace of mind you require when you drive, as well as meet your budget and lifestyle.
