While looking for auto insurance, drivers are often confronted with the choice of purchasing full coverage or only the state-required minimum. Usually full auto coverage will incorporate liability, collision, and comprehensive coverage and will protect you from almost all possible eventualities. This option, however, comes with higher premiums than basic liability insurance. This makes one wonder if full coverage is really a necessity, and the answer depends on multiple elements which include the value of your vehicle, your current financial state, and how much risk you are willing to take. In this guide we will analyze the advantages and disadvantages of full coverage auto insurance so you can make the best decision.
What is Full Coverage Auto Insurance?
Full coverage auto insurance isn’t a single policy as the name suggests, but rather an amalgamation of coverages that offer maximum protection to you and your vehicle. The most common part is liability coverage that pays for damages to other people or vehicles caused by your actions. It also includes ride-along coverage, which pays for repairs or replacement of your vehicle if it is damaged in a collision where another driver is at fault. Comprehensive coverage protects your vehicle from damages that are not due to collision such as theft, vandalism, fire, or other natural calamities. Full coverage may include such other options as uninsured/underinsured motorist coverage, personal injury protection (PIP), or even roadside assistance. Although broad protection is offered, full coverage is costlier than liability only insurance. Knowing the pros and cons of full coverage helps decide if it is necessary for you.
What are the advantages of Full Coverage Auto Insurance?
There are a lot of pros that give the customer peace of mind while on the road and that come with full coverage auto insurance. Primarily, theft, vandalism, and natural catastrophes all fall under full insurance coverage. This type of insurance will also safeguard you against car accidents. To add, collision and comprehensive coverage entails the responsibility of repairing and replacing your vehicle even when the collision is their fault. These are especially advantageous if you have more valuable, newer cars. Along this vein, if you have financed or leased your car, this level of coverage becomes a necessity to the lender or leasing company securing their investment. Moreover, after suffering an accident, having full coverage will lessen the financial burden if more expensive repairs are needed and total loss is inevitable. With full coverage, there is less worrying because you know there is protection from unexpected liability claims as well as incurring costly repairs.
Disadvantages of Full Coverage Auto Insurance
Having full coverage may provide peace of mind, but it also poses some disadvantages. The cost tends to be quite high compared to purchasing a liability-only insurance policy, owing to the fact that collision and comprehensive coverage are included. This price may be unreasonable for older cars, or ones that don’t hold much value. Collision and comprehensive identical to any other insurance policy have deductibles which you must meet before the insurance will pay for the coverage. Furthermore, there may be some upper limits placed on both reimbursement and replacement which may not provide enough for costly value repair or replacement. The insurer pays the actual cash value of your vehicle less depreciation, so if your vehicle is older and has high milage the payout will be lower than desirable. If your car’s value is not very high, then it may not make sense to my purchase the full coverage, especially if premiums increase over time. Weighing the arguments for and against full coverage coverage will determine if the expense for this peace of mind is actually worth the money.
When Full Coverage Makes Sense
There are instances when full coverage car insurance is necessary or beneficial. For example, if you have a new or expensive car, it is ideal since it prevents you from spending too much money in repairs or replacement of the vehicle. If a car is financed or leased, full coverage is most often required by the lender or leasing company in order to protect their equity interest in the automobile. It also helps for people living in areas subject to theft, vandalism, or even natural disasters, since there is valuable protection provided by comprehensive insurance. If an individual cannot pay out of pocket to repair or even replace their vehicle after an accident, full coverage offers peace of mind. In these cases, having full coverage ensures that you are financially covered for the losses you may incur.
When You Can Consider Skipping Full Coverage
In some circumstances, full coverage may be unnecessary and not cost effective. If the worth of your vehicle is low, then the full coverage premiums might cost more than what you would receive in a payout. Consider dropping comprehensive and collision coverage if the value of the car is less than ten times the premium. If your car is paid off and you are comfortable with the financial risk of having to pay out of pocket for replacement and repair, you may only need liability coverage. If you choose to have a lower premium by taking on higher deductibles, you need to be able to afford the out of pocket expense for the deductible in case a claim arises. If you do not frequently use the vehicle or have various options for public transport available, then you most likely do not need full coverage. Figure out the value of the vehicle, your financial situation, and driving habits to make a more informed decision on the need for full coverage.
How to Determine if Full Coverage Works For You
When deciding if full coverage auto insurance is needed, you must evaluate several areas of your life. Look at resources like Kelley Blue Book or Edmunds to determine your vehicle’s current market value. If it is low, full coverage may not be worth the cost. Look at your personal finances and consider how likely you are to be able to pay for repairs or a replacement on your own. If the chances are low, then full coverage is a good option. Think about how much risk you are comfortable taking. If you have a low tolerance for risk, then full coverage may be worth the expense. Determine your states minimum insurance requirements as well. While full coverage may not be needed, other lenders or lessors may require it. For those who frequently drive, live in high-risk areas, or park on the street, full coverage gets rid of the worry of accidents or theft. By looking at all these areas together, a decision can be made regarding full coverage.
Options Apart From Full Coverage
There are other alternatives available if full coverage is too much for you. Your state regulations can be satisfied with liability-only coverage. This type of insurance caters to the injuries or damages inflicted by you, while, at the same time, not protecting your vehicle. If you wish to only provide protection from certain types of risks, you may also select comprehensive-only or collision-only coverage. With usage-based insurance, premiums are charged depending on the driver’s behavior. Thus, safe drivers or those who do not drive frequently can take advantage of the lower rate. If you choose a greater deductible, you are required to pay less on the premium while still having coverage. All of these options would enable you to tailor your auto insurance policy according to your preferences and financial capabilities.
Full Coverage Auto Insurance
In most cases, deciding whether to purchase full coverage insurance for an automobile boils down to 3 things: your vehicle’s value, your finances, and your risk tolerance. An advantage of full coverage insurance is that the policy protects you against almost every risk possible. This, of course, is accompanied with higher insurance premiums. However, if a person has a new or high valued vehicle with a loan or lease and lives in a high risk area, full coverage will definitely protect them financially to a certain extent. This is not the case for older vehicles, or those that are not valued at all. In these scenarios, the individual would only need liability coverage. To ensure that expenses are affordable alongside the level of protection required, individuals are advised to analyze their needs with policy quotes. Regardless of whether an individual opts for full coverage insurance or a more basic policy, the right auto insurance guarantees sufficient peace of mind and financial protection while driving.
