What is Full Coverage Auto Insurance?
By Paul Breeding
Many think they carry “full coverage" on their car insurance policy; however, in reality there is no such thing as full coverage auto insurance.
When people talk about "full coverage" car insurance, they're often referring to a combination of coverages that help protect you. A “full coverage” policy is typically one that includes several types of car insurance coverages that, as a whole, provide a solid level of protection in case of an accident.
What Does “Full Coverage" Mean?
When you walk into an insurance agency and ask for "full coverage" auto insurance, chances are the agent isn't going to correct you and say there's no such thing. The agent will probably just assume you want liability, collision and comprehensive coverages. Since there is no car insurance coverage that goes by the name “full coverage," the term can mean different things to different people. This is where confusion can start and you may think you are covered for every possible situation, when you aren't. Typically, when a bank or lending institution requires you to have “full coverage”, they require you to have liability, collision and comprehensive. However, there are a lot of optional coverages that you should consider. Maybe you think you already have them because you have "full coverage" insurance. First, let's find out what exactly is Liability, Collision and Comprehension coverage.
Liability or no-fault insurance coverage (required in most states)
Liability car insurance pays for accidents you cause. When you cause an accident, you will be held accountable for injuries or property damage resulting from that accident.
Costs of injuries and property damage can be expensive. In fact, they can be so expensive that they are generally well out of the average person's budget. If you are unable to pay, you risk losing your assets or having your pay garnished, in lawsuits.
The best way to protect yourself from huge financial losses after an accident is by having adequate liability insurance. Adequate liability is the key phrase there. If you have the state minimum requirements and hit an expensive car, you're responsible for damages beyond your policy limits! For example, the Indiana state minimum property damage liability is $10,000. The average car price for 2018 was $35,285. If you total the car you hit or do serious damage to it, your insurance is only going to pay a maximum of $10,000. Guess who's responsible for the rest? In case you didn't get where I was going with that...It's you.
Collision coverage helps pay to repair your vehicle if you hit another car (or another vehicle hits your car). So, if you’re the victim of a hit-and-run accident, you may be able to make a claim on your own policy, regardless of whether the other driver is found.
Collision coverage typically has a deductible, which is the amount you'll pay out of pocket toward a covered claim. You may pay this deductible even if the accident isn't your fault. In the above example of a hit and run, you would have to pay your deductible.
Comprehensive insurance is coverage that helps pay to replace or repair your vehicle if it's stolen or damaged in an incident that's not a collision. Comprehensive typically covers damage from fire, vandalism, falling objects (like a tree or hail) or hitting an animal.
Comprehensive coverage typically has a deductible, which is the amount you'll pay out of pocket toward a covered claim.
Even with this, the details and amount of protection will vary by the company issuing the policy. You need to ask about the details and read the fine print carefully.
Additional coverages that can be added to your policy and what they do
Below is a list of OPTIONAL coverages that can be added to your policy. Don’t assume you have these already. If you didn’t ask for them, you may not have them. Most of the time, a good agent is going to explain these coverages and suggest you add them to your policy. Your agent isn’t trying to upsell you. These are coverages that you should consider carefully before declining. Usually if you decline these coverages, they’ll ask you to sign a document acknowledging these coverages have been explained to you and you have declined them.
Uninsured/Underinsured Motorist Bodily Injury Coverage
Uninsured motorist bodily injury coverage helps pay for medical bills and lost wages if you're hit by a driver without insurance. According to the American Institute of CPAs, uninsured motorist bodily injury coverage may also help provide coverage for hit-and-run accidents.
Uninsured motorist bodily injury coverage typically does not have a deductible.
Uninsured/Underinsured Motorist Property Damage Coverage
Uninsured motorist property damage coverage helps pay for repairs if your car is damaged by another driver without insurance. In some cases, it may help pay for damage after a hit-and-run.
However, uninsured motorist property damage coverage isn’t available in all states. And in some states where it is available, uninsured motorist property damage does not cover hit-and-run accidents, according to the Insurance Information Institute. If you’re unsure what your policy covers, talk to your insurance agent.
Uninsured motorist property damage coverage typically has a deductible.
Medical Payments Coverage
Medical payments coverage may help pay for you or your passengers' medical bills, regardless of fault, after a hit-and-run accident. This coverage isn't available in all states.
Medical payments coverage typically does not have a deductible.
Extended Transportation Expense (Rental Car Reimbursement)
Rental reimbursement, or extended transportation expenses coverage, can pay for a rental car if your car is damaged in a covered accident and your car is out of commission for more than 24 hours.
Full auto glass coverage pays for the cost to repair or replace your damaged auto glass or windshield with no deductible. Without this coverage, your glass may still be covered. However, it would be subject to your deductible which is usually more than the cost of the glass. You can add full auto glass insurance coverage to your car insurance policy for just a few dollars a month. Depending on the state you live in, this can be included in your comprehensive coverage or can be purchased as an add-on to your auto policy. The availability of full auto glass insurance coverage varies by state.
Emergency Roadside Assistance
Emergency roadside assistance provides services to help you through common roadside emergencies. Sometimes tires go flat, your keys may get locked in the car, or your battery dies. Emergency roadside assistance can give you peace of mind and can help make difficult situations on the road less stressful.
Towing (also known as Towing and Labor)
Towing coverage helps pay the cost to tow your insured vehicle when it is inoperable, whether or not an accident is involved. You could be down your driveway or miles away from your home; towing insurance coverage will help pay to tow your car to a repair shop to get it fixed.
Towing insurance coverage also covers the cost of any labor required at the site of the breakdown.
Gap insurance pays the difference between what you owe on your car and what it's worth at the time of an accident. Adding gap insurance could potentially save you thousands of dollars.
If you financed a new car, chances are this gap will linger for a couple of years, leaving you responsible for the difference in the event of a total loss. Eventually the difference in these totals will vanish, but in the meantime, gap coverage protects you from having to cover the difference.
Loan/lease coverage is a variant of gap insurance coverage. It's similar to gap coverage in that it's designed to cover the gap between what you owe on your car and its actual cash value. Where the coverages differ is in the amount they'll provide in the event of a total loss.
Unlike gap coverage, loan/lease coverage only provides some percentage of your car's actual cash value — often about 25 percent.
Before you think you’re covered in all situations because you have “full coverage” auto insurance, please read your policy and talk to your agent. Auto insurance policies can be bare-bones or loaded with optional coverages. You need to know what your policy says and what your policy covers. The time to do this is now. Don’t wait until you are in an accident and your insurance company tells you you’re not covered.
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