Liability vs. Full Coverage

Almost all Americans rely on access to motor vehicles for transportation. The U.S. Census Bureau reports that in 2020, over 91% of households in the U.S. had a vehicle. Since insurance is a legal requirement for car owners, most U.S. households must decide between liability vs. full coverage auto insurance.

The average U.S. household spends thousands per year on transportation costs, which may prompt you to favor cheap car insurance options. However, understanding the differences between full coverage and liability insurance coverage can help you make the best decision about your insurance, ensuring you have suitable coverage if you have to file an insurance claim.

What is liability insurance coverage?

Liability refers to legal responsibility. Suppose you’re in a car accident and damage someone’s vehicle. The vehicle’s owner can file an insurance claim and seek financial compensation for the damages. 

Claimants may seek compensation for bodily injury, property damage, or wrongful death. Costs covered by liability insurance include:

• Attorney fees
• Court costs
• Settlements or judgments
• Some medical expenses

Every state sets its insurance requirements, which is why it’s crucial that you ensure you comply with local laws. Florida residents may face financial penalties. Under state law, their licenses may be suspended if they don’t acquire and maintain property damage liability (PDL) and personal injury protection (PIP). 

What is full coverage insurance?

While liability insurance covers costs stemming from insurance claims and lawsuits, it doesn’t cover many other potential costs. Full coverage combines multiple car insurance policies, ensuring you have appropriate insurance for almost any scenario. Full coverage bundles liability insurance with collision, comprehensive, and bodily injury insurance.

You may need to fix your vehicle after an accident or replace it with a new vehicle if it’s totaled. Your collision insurance ensures you don’t pay out of pocket to fix your car if another motorist strikes it. Collision insurance also covers accidents with stationary objects. Suppose you hydroplane, lose control of your vehicle, and strike a street sign. You can cover related expenses through your collision policy.

Comprehensive coverage looks after costs that aren’t covered by your liability and collision insurance. Fire and storm damage are just two examples of situations where your comprehensive coverage protects you from the costs of repairing or replacing your vehicle. 

Collision and comprehensive coverage don’t cover medical costs, and standard liability policies only cover medical expenses for other injured parties. You need a bodily injury liability policy to cover your medical bills if you’re hurt in an accident. Full coverage policies include bodily injury liability insurance.

Full coverage ensures you have the primary types of car insurance needed for almost any situation you could encounter. In addition to covering your vehicle, your full coverage policy covers rental car insurance when you use a rental car.

Related: What to Do if Your Car is Totaled in an Accident

Liability vs. Full Coverage 

Choosing appropriate car insurance involves understanding the distinctions between each coverage option, related costs, and legal requirements in your state. You may also have contractual obligations to carry specific types of insurance if you have a car loan or you’re using your car as collateral on another loan.

Details	Liability Insurance	Full Coverage
Average Cost Per Year	$545 (Minimum Coverage)	$1,771
Does it include Standard Liability Insurance?	✅	✅
Does it include Collision Insurance?	–	✅
Does it include Comprehensive Insurance?	–	✅
Does it include Bodily Injury Liability Insurance?	–	✅
Required by Florida State?	✅	No*
Required for car loans?	✅	✅

* Florida State requires PIP and PDL insurance but does not require all types of insurance covered under a full insurance policy.

Benefits	Liability Insurance	Full Coverage
Covers Storm Damage	–	✅
Covers Legal Fees	✅	✅
Satisfies Florida State PDL Requirements	–	✅
Most Affordable Option	✅	–
Covers Your Medical Expenses	–	✅
Has No Deductible Fee	✅	–

Bottom Line

There are multiple types of auto insurance, including liability insurance, collision, comprehensive insurance, and full coverage. Investing in suitable car insurance can protect you from legal and financial issues. To choose the best insurance for your needs, you should take the time to learn what each insurance policy covers. Understanding the differences between liability insurance and full coverage can help you choose the best insurance for your needs.

Frequently Asked Questions

1. Is full coverage worth it?

Full coverage insurance provides peace of mind when you’re in an accident. You won’t have to worry about whether your insurance will cover related claims. Full coverage may be worth the cost if you commute to work or school.

Full coverage covers the costs of damage from vandalism and theft. Consequently, it’s a good idea for car owners to invest in full coverage if they own a vehicle commonly targeted by thieves.

Lenders include insurance requirements in their loan agreements to protect their financial investment. Ensuring the driver has full coverage mitigates their potential losses because the vehicle usually serves as collateral for the loan. You may also need full coverage if it’s required by state law to register your vehicle.

2. Why would someone only carry liability insurance?

The vehicle’s age and level of use may prompt some owners to opt for liability insurance instead of full coverage. The additional costs of even the cheapest full coverage insurance may outweigh the policy’s potential benefits if you have an older vehicle. You may not need full coverage if your state doesn’t require full coverage, you don’t have a car loan, and you don’t drive often.

Sources:

Household Spending on Transportation: Average Household Spending. 2022.

Florida Insurance Requirements. 2014.

Sham, J. (2022). Average cost of car insurance in September 2022.