Is It Worth Buying Full Coverage Auto Insurance?
Last Updated on December 8, 2022
Full coverage auto insurance gives drivers a higher level of protection at a higher cost.
But is full coverage auto insurance worth it? Or are you overinsured with full coverage auto insurance?
The answer, as with many insurance questions, depends on your budget and aversion to risk. Today, we’re explaining everything you need to know about whether or not it’s worth it to buy full coverage auto insurance.
What Is Full Coverage Auto Insurance?
Full coverage auto insurance protects drivers against multiple hazards in multiple ways. Full coverage auto insurance is not required in any state, but it does provide an additional level of protection that many drivers will appreciate.
Full coverage car insurance consists of three major components:
Part 1) Liability Insurance
Full coverage car insurance includes liability coverage, which includes bodily injury liability and property damage liability coverage. These coverages protect other drivers on the road: they cover the other driver’s property repair bills, medical bills, lost wages, and other expenses. If you cause an accident, your liability insurance will protect you and compensate you for the damages you caused. Every state in America requires some liability insurance.
Part 2) Collision Insurance
Collision coverage is the second component of full coverage car insurance. Collision coverage would cover damage to you, your passengers, and your vehicle if the accident was your fault. Collision coverage is optional in every state. If you don’t have collision coverage, your insurance company will not compensate you for vehicle damage after an accident you caused. Collision insurance typically comes with a small deductible ($250 to $1,000) that must be paid out of pocket, while your insurance covers the remainder.
Part 3) Comprehensive Insurance
Comprehensive insurance covers damage to your vehicle that occurred outside of a car accident, including damage that occurs when you’re not driving your vehicle. If someone vandalizes your vehicle, for example, or if a hailstorm damages your vehicle, then you can make a claim through your comprehensive coverage. Comprehensive coverage is optional in every state and comes with a deductible of $250 to $500. Any claims you make through your comprehensive coverage should not raise your rates.
Does Full Coverage Cover Everything?
The three components listed above make up full coverage car insurance. However, full coverage car insurance doesn’t necessarily cover everything.
Some of the items that are not covered through full coverage car insurance include:
Uninsured and Underinsured Motorist Coverage: 1 in 7 drivers in America have no car insurance. That means if you’re involved in an accident, there’s a 1 in 7 chance that the other driver has no car insurance. Some states require you to have uninsured/underinsured motorist coverage, although most states do not. Full coverage car insurance does not include uninsured/underinsured motorist coverage, although you may want to add it for added protection. Note: if you live in a state that requires uninsured/underinsured motorist coverage, then your full coverage car insurance will include uninsured/underinsured motorist coverage.
Gap Coverage: If you are financing or leasing a vehicle, there may be a ‘gap’ between the amount you paid for the vehicle and the amount your vehicle is worth. You may have just paid $50,000 for a brand-new truck, for example. When you drive it off the lot, however, the truck’s value immediately drops to $45,000. If you get into an accident on the way home, your insurance will pay you $45,000, while you still owe $50,000 for your truck. Gap insurance covers this ‘gap.’
Medical Bills: Sometimes, full coverage car insurance will cover the medical bills of you and your passengers. In other cases, it will not. If the accident is your fault, for example, then the medical bills of you and your passengers may not be covered.
Roadside Assistance: Full coverage auto insurance does not typically include roadside assistance. However, it is always available as an add-on.
Other Add-Ons: From windshield coverage to medical payments (MedPay) coverage, there are all types of add-ons you can add to your full coverage car insurance as needed. Consider adding these coverage options to get added protection.
Who Needs Full Coverage Car Insurance?
By law, nobody technically ‘needs’ full coverage car insurance. However, full coverage car insurance is the right option for certain people in certain situations, including:
Anyone Making Car Payments: If you are leasing or financing your vehicle, then your lender will require you to have full coverage car insurance. Remember: your vehicle is the collateral in the loan, and the lender wants to protect that collateral. If you do not maintain full coverage on your leased or financed vehicle, your lender can legally repossess your vehicle.
Anyone Who Can’t Afford to Replace or Repair a Vehicle: If you have basic liability coverage (not full coverage), then insurance will not cover the cost of repairing or replacing your vehicle. If you get into an accident, you must cover the repair or replacement costs out of pocket. If you cannot afford to cover the cost of replacing your vehicle, then you may want to buy full coverage car insurance.
Anyone Who Drives a Lot: If you drive a lot, you are at a higher risk of being involved in an accident – even if you’re the world’s safest driver. Bad weather, bad drivers, and other factors can all cause you to make an insurance claim. Without full coverage, you could be underinsured in an accident. Infrequent drivers, on the other hand, might want to skip buying full coverage and opt for liability-only insurance instead.
Anyone Who Drives a New, High-Value Vehicle: If you drive an old, beat-up car, it’s generally safe to drop full coverage car insurance. If you have a new, high-value vehicle, however, then you’re risking a significant amount of money by going without full coverage car insurance.
How Much Does Full Coverage Car Insurance Cost?
There’s no set price for full coverage car insurance. Different insurance companies offer different prices on full coverage car insurance. Each driver’s history will also impact the price of car insurance.
All of the factors below will affect the price you pay for full coverage car insurance:
- Driving Record
- Age and Gender
- ZIP Code
- Type of Vehicle
- Credit Score
Ultimately, insurance companies use dozens of factors to calculate the risk for each driver. Based on these factors and your individual risk profile, you will pay higher or lower rates for full coverage car insurance.
Pros and Cons of Full Coverage Car Insurance
Ultimately, full coverage car insurance boils down to a handful of pros and cons, including:
Pros
More Coverage for More Situations: Full coverage car insurance covers you against more situations than basic liability insurance, including theft, vandalism, at-fault collisions, hailstorms, environmental damage, and more.
Peace of Mind: Are you willing to pay more monthly for greater peace of mind? Full coverage car insurance may be the right choice for you. Yes, you pay more, but you get significantly more coverage. No matter what happens to your vehicle, your insurance company should compensate you.
It’s Required for Leased or Financed Vehicles: If you are leasing or financing a vehicle, then full coverage car insurance is most likely required as part of your lending agreement.
Cost-Effective for Newer Vehicles: Can you afford to repair or replace your brand-new $40,000 SUV out of pocket? You can drop full coverage car insurance on older vehicles. On newer vehicles, however, full coverage car insurance may be a smart investment.
Cons
More Expensive: Full coverage car insurance is always more expensive than traditional car insurance. You’re paying more money for more coverage.
Doesn’t Cover Everything: Some people assume full coverage covers everything. However, full coverage car insurance still lacks coverage for certain people in certain situations. There’s no medical payments coverage, for example, or uninsured/underinsured driver insurance. Instead of assuming full coverage car insurance covers everything, we recommend analyzing your policy based on your unique insurance needs and budget.
Not Cost-Effective for Old, Low-Value Vehicles: If you drive an old, beat-up vehicle, then full coverage car insurance may not make a lot of sense. You’re paying a significant amount for full coverage car insurance even though your vehicle isn’t worth that much. Even after a minor accident, your car might be declared a total loss. In this case, it may not be worth it to maintain full coverage car insurance.
Final Word on Full Coverage
Full coverage car insurance has its pros and cons. These pros and cons boil down to your risk aversion. Are you willing to pay a little more for a lot more insurance coverage? Or do you want to save money and take on more risk?
Based on your budget and risk aversion, it may or may not be worth it to have full coverage car insurance. In some situations – say, if you’re leasing or financing a vehicle – full coverage car insurance is required.
