Liability vs. Full Coverage: Which is Better for You?

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Liability vs full coverage: woman counting money in front of 2 cars that crashed into each other

Buying car insurance seems simple enough. Everyone needs to have it, so how complicated can it be? Yet as you browse through the different types of coverage, you’re inundated with jargon, fine print, and other details that make the experience far more difficult than you anticipated. On top of that, first-time buyers or new car owners constantly struggle with one common problem: figuring out the difference between liability and full coverage.

With huge differences in what’s covered and how much it costs, choosing one over the other may seem overwhelming. So if you’re struggling to make sense of these two kinds of coverages, don’t stress. Find out the answers to your questions and choose the right option between liability and full coverage.

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Key Takeaways:

  • Understand what is not covered under a basic liability insurance policy, and consider the additional expense of full coverage to provide you with peace of mind if your car is damaged or totaled in an accident.
  • You are required to carry liability insurance coverage in all but two states. Full coverage is not required by any state, but your lender will require it if you have a loan on your vehicle.
  • Even if you live in a no-fault state, you need to have liability coverage and adding full coverage will help to ensure that you can repair your car after an accident whether the accident is your fault or not.

What’s the Difference Between Liability and Full Coverage?

Liability vs full coverage: vehicle collision

Liability insurance is a basic car insurance policy that fulfills the minimum legal requirement to drive in most states. If you’re involved in an accident where you’re the at-fault party, liability coverage pays for damage to the other motorists’ property and their medical bills.

Full coverage car insurance is an all-inclusive policy that includes liability insurance in addition to several other types of coverage. While it covers the other driver as liability-only insurance would, full coverage also provides protection for your vehicle and your medical bills, regardless of who’s at fault — whether it’s you, another driver, or a thief, or if the accident is an act of God/the result of a natural disaster. However, full coverage car insurance is not required by law in any state.

Personal preference is a deciding factor in many of these purchases, and lenders’ requirements also play a part for car owners who’ve taken out a loan to pay for their vehicle.

What is Liability Insurance?

Liability vs full coverage: man talking on the phone while looking at his damaged car

Now that you have a basic idea of the difference between liability and full coverage, it’s time to dive a bit deeper. Liability insurance essentially contains two parts: property damage liability and bodily injury liability.

When you’re at fault in an accident, property damage liability insurance pays for expenses related to damage to the other driver’s vehicle or their personal belongings.

Bodily injury liability works similarly, but it pays for the medical bills of the driver, including hospitalization or lost wages due to injury.

Keep in mind that each state’s minimum liability coverage requirements vary. Always make sure that you have at least the minimum level of coverage, or you could receive a ticket from law enforcement.

What if I Live in a No-Fault State?

If you live in one of the 12 no-fault states, liability insurance works a bit differently. The property damage liability insurance requirement remains; however, these states require you to carry personal injury protection insurance, also known as PIP insurance.

Rather than pay for the medical expenses of the other driver, PIP insurance pays for your own medical expenses. The idea behind this type of insurance is to cut through red tape by eliminating an investigation as to who was at fault in an accident and by providing more efficient and timely medical services and reimbursement.

If you live in Kentucky, Pennsylvania, or New Jersey, you have the option of choosing either PIP or traditional liability. These are known as “choice no-fault” states, giving you more flexibility on the auto insurance policy you choose for your vehicle.

How Do I Read Liability Coverage Types?

When you’re buying liability through an insurance agent or online, you might be quoted a three-number figure like 50/100/50. That’s normal. These three coverage limit lines mean:

  • 50 ($50,000): This is the maximum amount of bodily injury liability coverage per person.
  • 100 ($100,000): This is the maximum amount of bodily injury liability coverage per accident.
  • 50 ($50,000): This is the maximum amount of property damage liability coverage per accident.

You might also find a combined single limit that lists one limit for liability and property damage. The limit can be distributed, however it needs to be after an accident without limiting the coverage per person. It can also allow for more to be paid out for property damage if necessary.

Liability limits, or minimum requirements, vary from state to state, so check with your local DMV to find out what level of insurance coverage you need.

What is Full Coverage Car Insurance?

Liability vs full coverage: man happily looking at the camera

Full coverage is the all-encompassing body of car insurance. It covers just about everything, including:

  • Comprehensive coverage
  • Collision coverage
  • Liability coverage
  • PIP, if necessary
  • Uninsured and underinsured motorist protection
  • MedPay
  • Possibly roadside assistance

If you have full coverage car insurance, almost everything is covered with the notable exceptions of MedPay, roadside assistance, and uninsured/underinsured motorists. But aside from the deductible, you won’t pay much — if anything — for the damage to your own vehicle.

Do I Always Need Liability Coverage?

Person handing a car key to a driver

You always need liability coverage, unless you live in New Hampshire or Virginia. New Hampshire has no laws regarding liability insurance, and subsequently, a full coverage policy. Virginia requires liability insurance, but if you pay $500 a year to the DMV, you can opt out of liability-only car insurance; just make sure you have enough money to pay for medical bills or property damage if you’re at fault in a car accident.

When Do I Need Full Coverage Auto Insurance?

Stressed man with a damaged car in the background

While full coverage isn’t required by any state law — but lenders may require it on a car loan — you may come across quite a few situations where full coverage is the smarter idea. 

If you have a car loan, the lender will mandate that you have full coverage insurance. This ensures that you’re protected for the entire value of your car. It includes coverage of the following varieties:

  • Collision insurance
  • Comprehensive insurance
  • Protection against theft and vandalism
  • Rental reimbursement if your car is in the shop, or rental car insurance

What Other Car Insurance Products Should I Consider?

Cars that crashed into each other

Deciding between liability vs. full coverage isn’t easy. And to exacerbate the situation, you still have additional coverage possibilities to consider. Here are some other options whether you’re buying a new or used car:

  • MedPay (medical payments coverage): In a non-PIP state, this pays for your medical bills if you’re hurt in an accident
  • Gap insurance: Pays the difference between the value of your car and the amount owed on your loan if the car is totaled

Other than these options, you should always consider an upgrade to your liability policy. While you can do the bare minimum, add-ons, increased policy limits, and the added peace of mind are indescribably amazing.

While a clean driving record will make these prices go down, in the event of an accident, the average insurance cost is higher than you may think. That’s when you should ignore the random FAQs around the internet and focus solely on

Want to Pay Less? Make Sure to Shop Around

Family happily riding a car

Whether you just need liability for an old beater or full coverage for your brand-new ride, shopping around for the right car insurance policy is the only way to get the best price possible. So stop shopping for single quotes at car insurance company websites and let help you find affordable auto insurance with a free comparison tool.

In a minute or two, you can compare rates for liability vs. full coverage from multiple insurance companies quickly, easily, and conveniently. It might just be the best move you can make for getting the coverage you need — and for your finances.

Pop in your ZIP code below to find your ideal coverage and maximize your savings:

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