Liability vs. Full Coverage Auto Insurance
Insurance terms can become hard to discern when researching each major insurance category. Liability insurance is a major component of every type of insurance to cover the damage to the property belonging to other people. Every state requires liability auto insurance coverage for any driver who owns a vehicle. The auto insurance policy covers the vehicle regardless of the person driving it. There are specific differences between comprehensive, collision, and liability automobile insurance.
Comprehensive Automobile Insurance
When a car owner is making monthly loan payments, comprehensive automobile insurance is the best choice for auto insurance coverage because of the liability to the lender.
- Comprehensive insurance will cover theft, storm damage, flood, fire, or a collision with an animal.
- Repair or replacement of the vehicle at a level equivalent to the market value of the automobile is paid by the insurance company.
- The policy deductible applies to repairs in various ways, including: glass repairs will have a separate deductible and major collision repair will have a larger deductible.
- The insured driver pays the deductible and then the insurance company pays the remainder of the cost.
- Comprehensive policies include collision coverage and liability coverage.
Collision Automobile Insurance
Once the loan is paid in full, many car owners will change their insurance coverage to collision auto insurance coverage because the premium expense is lower than comprehensive insurance.
- Collision insurance covers the cost of repairs to your car in the event of an auto accident.
- This variety of auto insurance coverage is not required by law.
- If the auto insurance policy contains the collision component but not the comprehensive component, theft, fire, and other non-collision related events are not covered.
- Collision auto insurance policies include the liability component.
Liability Automobile Insurance
Every automobile licensed driver who owns a vehicle is required by law to carry an automobile liability policy on their car. Collision and comprehensive automobile coverage components are not required by law.
- Liability auto insurance policies have specific coverage components:
- Bodily Injury – This liability component of the auto insurance policy will pay the medical expenses for the people in the other vehicle involved in the automobile accident. Every state has minimum coverage requirements that must be met by the bodily injury component of the auto policy.
- Property Damage – Whenever an accident damages another person’s vehicle or the private or public property, the property damage portion of the auto policy will pay to make repair to property. Minimum amounts of coverage must be carried by every driver to pay for possible property damage.
- Better to carry too much – Purchasing too little liability insurance can have far-reaching consequences for the at-fault driver. Liability insurance is the one area that cannot be over insured. When attempting to lower the premium for auto insurance coverage, consider switching to collision from comprehensive prior to lowering liability coverage amounts.
Conclusion
When the automobile value has fallen to an affordable level, the driver may decide to carry only liability coverage because he can afford to replace the car without a payment from the insurance company. Careful consideration must be given to the annual auto premium compared to the overall replacement value of the car. If three years of premium payments for a collision policy would exceed the value of the car, the best financial decision may be to carry only liability coverage on the vehicle.
One option for the multiple vehicle family is to carry liability-only auto insurance coverage on older vehicles while comprehensive coverage is carried on newer vehicles with higher replacement values. Collision insurance should always be carried on the cars used by young drivers because of the higher risk associated with their earliest driving years.
