Some people comparing car insurance cost will request a liability only policy while others request a quote for full coverage car insurance. Most people have a general idea what they are requesting when asking for one or the other, but they may not understand this can be written several ways. Let’s contrast the two and look at how both can be written.
In simple terms, full coverage car insurance means the policyholder’s car or truck will be covered if in an accident while liability coverage will pay to fix the car and provide some level of medical care for the person the policyholder hits. The sections of most car insurance policies include:
- Bodily Injury Property Damage (BIPD): this is the liability piece which protects the vehicle owner if they are at fault in an accident.
- Uninsured / Underinsured Motorist coverage (UM/UIM): optional coverage to protect the vehicle owner if they’re hit by someone with no or not enough car insurance.
- Comprehensive deductible: covers damage to vehicle caused by hail, flood, falling object, hitting an animal, etc.
- Collision deductible: covers repairs to owner’s vehicle caused by an accident regardless of who is at fault.
- Towing & Roadside Assistance: optional coverage for a tow, unlocking a door, help with changing a tire, etc.
- Rental Car Reimbursement: provides a rental car if vehicle is involved in an accident.
Liability Coverage: Pure liability only coverage means the policyholder only has bodily injury property damage coverage. There’s no coverage for UM/UIM, towing, roadside assistance, nor rental car reimbursement. In addition, there’s no comprehensive or collision coverage / deductible either. This is the cheapest form of car insurance.
Liability coverage, may also include adding one or more options including UM/UIM, and possibly even towing and roadside assistance. They may even add the comprehensive deductible, which most car insurance companies will require if the policyholder wants towing and roadside assistance.
The advantage of carrying UM/UIM is it provides medical coverage for the policyholder and their passengers and potentially repairs to the vehicle if involved in a not at fault accident. The cost to add these items is very little and may make sense depending on one’s budget and the vehicle’s value. The only items not covered in this approach are repairs to the policyholder’s vehicle and rental car reimbursement.
Full Coverage: At a minimum, full coverage simply means the policyholder has BIPD and the collision deductible. This provides coverage whether involved in an at fault or not at fault accident. Additional options may be added as desired including UM/UIM, comprehensive, towing and roadside assistance, and rental car reimbursement, however, one doesn’t have to carry all of them for it to be a full coverage policy.
If the vehicle owner has a car loan, the financial institution who made the loan may require the policy owner carry certain limits of coverage on BIPD, UM/UIM, and deductibles, but that’s because they want the loan protected as much as they want the vehicle protected.
Ultimately, my role as an independent insurance advisor is to understand what a person’s needs are and match the level and type of coverage which meets their needs. What questions do you have? Share them with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
