Difference Between Full Coverage and Liability

All cars, big or small; expensive or inexpensive need insurance since law requires it even if you are the best driver. However people purchasing cars for the first time are often confused by the type of cover to choose. Read this simple guide to understand what you need.

Car insurance can be broadly classified under two heads:

  1. Liability
    • It is the most basic type of coverage. All states require you to have this although the minimum amount required depends on the individual state’s regulation. It is thus prudent to carry papers of insurance as proof.
    • It covers the cost of that damage which is caused to the other driver or vehicles as a result of your fault.
    • It is comparatively cheaper than full coverage since you or your asset is not covered but only your responsibility in damaging the other party’s asset is covered.
    • This type of policy can be subdivided into Personal Injury Liability and Property Damage Liability. The former requires reimbursement of the cost incurred in the treatment of any bodily injuries incurred by the driver or passenger in the other car because of your faulty driving and the latter type makes mandatory payment of damage to property (including fences, building and the vehicle) in an accident brought about by your car. Personal Injury Liability will also include all costs related to legal defense and any settlement of lawsuits.
  2. Full Coverage has a higher premium rate and includes collision and comprehensive coverage. The latter makes good to you the losses in the event your vehicle gets into an accident; this means that even if you hit your car into a tree or any barrier etc. you can apply for claim. Comprehensive coverage will also compensate your losses in case of vehicle damage but not due to accident but various other reasons like theft, vandalizing, or an object like a tree falling on top of your car etc.

Now that you know how the above two policies can help you in compensating losses you might want to consider your current situation:

  • If you have a new expensive car then option No.2 is wise since you do not want to make another significant amount of investment just a few days or months after a new car.
  • If the car is new and not so expensive and you are the most confident and skilled driver around then go for option 1.
  • Suppose you have bought an old car then also option 1 would not be a bad idea since at least the cost of paying the other vehicle owner would be covered and because the cost of investment is less you can go in for another car.
  • If you are considering taking a loan to buy a car then you will definitely have to take option 2.

Remember, decide on that insurance which gives you the highest coverage for your cost.