What’s known as “full coverage,” on the other hand, typically refers to a car insurance policy that bundles liability coverage with physical damage insurance and other coverage types that are required by law in your state.
Pro tip
Liability vs. full coverage insurance comes down to what—and who—your policy protects. Liability insurance covers injuries and property damage you cause to others after an at-fault accident. Full coverage typically includes liability insurance plus comprehensive and collision coverage, helping pay to repair or replace your own vehicle after covered accidents, theft, vandalism, severe weather, or other covered losses.
If you drive an older car with a low market value and want the lowest premium for a policy that satisfies your state’s minimum insurance requirements, you may opt for liability-only coverage. Full coverage insurance is often better if you finance or lease your vehicle, own a newer or more valuable car, or want broader financial protection after an accident or other covered claim.
Here’s how to decide between each.
Key Takeaways
- Liability car insurance covers other people’s medical treatments and car repairs when you’re liable for an accident.
- Full coverage typically bundles liability coverage with comprehensive insurance, collision insurance, and any other coverage types that are required by law in your state.
- Nearly every state requires all drivers to carry liability auto insurance.
- You aren’t required by law to purchase full coverage, but it may be required by your lender or lessor.
- The average driver pays a little more than $700 per year for liability-only car insurance, and a little over $1,400 per year for full coverage.
What is liability car insurance?
Liability car insurance pays for another person’s medical bills or property repairs and your legal expenses if you’re responsible for a car accident. It doesn’t pay to repair your own vehicle or cover your injuries. Liability coverage typically includes two parts:
- Pays for another person’s medical expenses, lost wages, and related costs if you injure them in an at-fault accident.
- Pays to repair or replace another person’s vehicle or other property that you damage in an at-fault accident.
Drivers are required by law to carry liability car insurance in every state other than New Hampshire. You must purchase at least the minimum amount of liability coverage required in your state, though it’s recommended that you purchase a policy with even higher coverage limits than your state requires to ensure you’re adequately protected in case of an at-fault collision.
What is full coverage car insurance?
While full coverage doesn’t have a universal definition, it usually refers to policies that combine government-mandated car insurance coverages with optional physical damage protection. Depending on your state, the following coverage types may be included within a full coverage car insurance policy:
- Liability coverage
- Comprehensive coverage
- Collision coverage
- Uninsured motorist coverage
- Underinsured motorist coverage
- Personal injury protection
- Medical payments coverage
Drivers aren’t required by law to purchase collision or comprehensive car insurance in any state. However, these physical damage coverage types are frequently required by lenders and lessors. As a result, you may need to purchase and maintain a full coverage auto insurance policy for as long as you are financing or leasing your vehicle.
What are the differences between liability and full coverage car insurance?
Check out the table below to see the main similarities and differences between liability-only auto insurance and full coverage car insurance.
What does liability car insurance cover?
A liability car insurance policy may provide coverage for the following expenses if you’re held liable for injuring another person or damaging their property in an accident:
- Medical and rehabilitative care
- Lost wages
- Disability payments
- Death benefits
- Property repairs or replacements
- Payments equal to the actual cash value of a totaled car
- Legal fees
- Certain supplementary expenses, such as costs associated with missing work to attend depositions at your insurance company’s request
Pro tip
Liability insurance is designed to protect you from the financial consequences of injuring someone else or damaging their property. It generally doesn’t cover your own medical bills or vehicle repairs. If another driver causes the accident, their liability insurance may pay for your covered losses instead.
What isn’t covered?
Your liability insurance won’t cover any of the following situations or expenses:
- Damage to your vehicle or other property
- Medical treatments for you or your passengers
- Losses caused by uninsured or underinsured drivers
- Most first-party expenses stemming from a car accident that you’re responsible for
What does full coverage car insurance cover?
Full coverage insurance combines liability insurance with collision and comprehensive coverage—and potentially other state-required coverage types—giving you broader financial protection than liability-only insurance. Depending on your state and policy, full coverage may help pay for:
- Any expenses covered by liability insurance
- Damage to your vehicle from a car accident
- Damage to your vehicle from an external peril, such as fire, theft, vandalism, or natural disasters
- Medical treatments for you or your passengers
- Losses caused by uninsured or underinsured drivers
- Lost wages, child care, and other similar expenses that may arise while you recover after an accident
What isn’t covered?
Even full coverage insurance has exclusions. Depending on your policy, it generally won’t cover:
- Remaining loan or lease balances (unless you purchase gap insurance)
- Rental car costs (unless you add rental reimbursement coverage)
- Roadside assistance (unless you purchase it separately)
- Personal belongings stolen from your vehicle
- Routine maintenance and mechanical breakdowns
- Normal wear and tear
- Business use of your vehicle (unless covered by a commercial policy)
Average cost: Liability insurance vs. full coverage
According to the most recent data from the National Association of Insurance Commissioners, auto liability insurance costs a little over $700 per year on average. Meanwhile, full coverage costs an average of a little more than $1,400 per year—though exact prices may depend on the coverages included in the policy. Keep in mind that auto insurance premiums can also vary from person to person based on factors such as:
Read more The gilded cage: Why Gen Z’s favorite escape is the era that looks most like now
- Driving record
- Mileage
- Location
- Personal information
- Vehicle characteristics
- Policy details
When liability insurance makes sense
Again, nearly everyone needs liability insurance to meet the legal requirements to drive—and it’s recommended even when it isn’t mandatory. That said, a liability-only policy may not provide a sufficient level of coverage for most drivers. You may still benefit from a standalone liability insurance policy if any of the following apply to you:
- Your state’s laws don’t require you to buy any coverages other than liability insurance
- Your car isn’t worth enough to justify purchasing comprehensive and collision coverage
- You can afford to buy a new or used car out of pocket in the event of a total loss
- Your health insurance is sufficient to cover major medical bills after a car wreck
- You want to pay as little as possible for a policy that meets your state’s minimum coverage requirements
When full coverage makes sense
Full coverage insurance offers broad protection that may not be necessary for every driver. However, you would likely benefit from obtaining full coverage car insurance in the following situations:
- You’re still leasing your car or paying off your auto loan
- You have a new or highly valuable car
- Your policy covers a teenage driver who is especially likely to get into car accidents
- Your region has a high exposure to theft, natural disasters, collisions, or uninsured drivers
- You’re willing to pay higher premiums in exchange for the peace of mind that comes with more thorough insurance protection
Can you switch between liability and full coverage?
Remember, if you’re still financing or leasing your vehicle, you may be required to maintain full coverage, meaning you can’t freely switch to a liability-only policy.
But, if your car is paid off or your lease has ended, you may be able to switch between liability insurance and full coverage as you see fit. In general, it’s recommended that you remove comprehensive and collision coverage from your policy if they cost more than 10% of your car’s worth.
Liability vs. full coverage insurance at a glance
- Liability insurance is a type of car insurance coverage that steps in whenever you’re held responsible for a car accident, while full coverage is an informal term that typically refers to policies that include liability coverage, physical damage coverage, and other state-mandated coverage types.
- The main function of liability auto insurance is to cover other people’s medical and repair bills when you’re at fault, though it can also cover your legal expenses. A full coverage policy may cover a wider range of losses, potentially including physical damage, uninsured motorist, and personal injury claims.
- Drivers are required by law to obtain car liability insurance in every state besides New Hampshire. Full coverage is legally optional but often required by lenders and lessors.
- On average, you can likely expect to pay around $60 per month for liability-only auto insurance or $120 per month for full coverage auto insurance.
- Full coverage is recommended for anyone who has a new or high-value car, is still financing or leasing their vehicle, or has a high exposure to losses that would be covered by full coverage. Meanwhile, standalone liability insurance makes more sense for drivers who have older and less valuable cars, a tight budget, or enough money in the bank to cover car repairs or replacements out of pocket.
- Switching from full coverage to a policy that only meets your state’s minimum requirements may make sense if you own your car outright and it’s worth less than 10 times the cost of comprehensive and collision insurance.
How to choose the right car insurance coverage
When deciding whether you need liability or full coverage, consider the following factors:
- Whether you could afford to repair or replace your car out of pocket after an accident
- Whether you intend to buy your car outright rather than financing or leasing it
- Whether you have a high exposure to dangers like hail, animal strikes, and falling objects
- Which types of car insurance are required by law in your state
Once you’ve decided which type of auto insurance policy makes the most sense for you, it’s a good idea to compare quotes from multiple insurance carriers. Each insurance company may have its own unique methods for analyzing risk and setting premiums, so shopping around can help you find the insurer that can offer the lowest possible rates for your circumstances.
The takeaway
“Full coverage” is common parlance to describe a car insurance policy that combines liability, collision, and comprehensive coverage. It’s pricey, but it’s often mandatory for those who lease or take out a loan for their vehicle. But even if you’re doing neither, it can still be a good idea if your vehicle is expensive—or if you can’t reasonably purchase another car outright if something were to happen to your car.
In just about every state, liability insurance is required by law. It can shield your from much of the expenses associated with injuries or property damage you cause to someone else in a car accident.
Frequently asked questions
Do you need both liability and full coverage?
No. Full coverage insurance typically includes liability insurance, so you don’t need to purchase them separately. If you finance or lease your vehicle, your lender or leasing company will likely require you to carry full coverage insurance.
Is full coverage legally required?
No. No state requires drivers to carry full coverage insurance. However, if you finance or lease your vehicle, your lender or leasing company will likely require collision and comprehensive coverage in addition to liability insurance.
Does full coverage include liability insurance?
Yes. Full coverage insurance typically includes liability insurance, along with collision and comprehensive coverage. Depending on your state, it may also include other required coverages, such as uninsured motorist coverage or personal injury protection (PIP).
When should you drop full coverage?
You may want to drop full coverage if you have an older vehicle that’s worth less than 10 times the combined cost of comprehensive and collision coverage. Before making the change, consider whether you could comfortably afford to repair or replace your vehicle out of pocket.
Can you finance a car with only liability insurance?
No, you generally can’t finance a car if you only have liability insurance. Most lenders also require collision and comprehensive coverage.
About the Author
