What Is Full Coverage Auto Insurance?

The term "full coverage" does seem quite comforting, doesn't it? It leads you to believe that your vehicle is guarded against almost everything that can possibly go wrong. But here's the reality: full coverage isn't a special policy and it isn't covering anything.

Rather, it's a standard term that refers to a package of coverages that collectively offer wider protection than simply basic liability insurance. So if you have ever been curious about what exactly full coverage is, or if you really need it, here's what you need to know.

What Full Coverage Actually Includes

When individuals use the term "full coverage," they are often referring to a package of three main types of protection:

Liability insurance pays for injuries and property damage you inflict on another person in a crash. It's the minimum most states require to drive legally.Collision coverage reimburses you for damage to your own car if you bump into another vehicle or object, regardless of who is at fault. Comprehensive coverage shields you from non-crash-related accidents, such as theft, vandalism, hail, fire, or a tree branch landing on your vehicle.

Collectively, they constitute a balanced safety net. Insurers sometimes include 

additional benefits such as roadside assistance or rental reimbursement  but those are supplemental options, not included in the standard "full coverage" bundle.

Why the Term Can Be Misleading

As much as it sounds, "full coverage" does not imply your policy covers everything. There are still things outside its scope.

For instance, if your engine breaks down due to wear and tear, that’s not covered  unless you’ve bought a separate mechanical warranty. If someone steals your laptop from your car, that loss would fall under renters or homeowners insurance, not auto.

It also won't pay for things such as driving your car for rideshare or delivery purposes unless you've purchased commercial or rideshare-specific coverage.

That's why it's so crucial not to take it for granted that you're "fully" covered simply because the name says so. Always take a few minutes to review the small print or inquire with your insurer what's actually covered.

Do You Really Need Full Coverage?

It depends on your circumstances and your vehicle.

If you’re still financing or leasing your vehicle, full coverage probably isn’t optional. Lenders and lease companies usually require it to protect their investment.

But if you already paid for your car in full, it's up to you. If your car is recent, is pricey, or you couldn't quickly replace it, having full coverage could be well worth it. But if you're driving a 15-year-old vehicle that's only worth a few thousand dollars, paying for collision and comprehensive coverage may no longer be worth it.

The trick is finding a balance between protection and cost. 

You need enough to keep you from going broke if something goes wrong — but not so much that you're paying more than your car's value to have it insured.

How Much Does It Usually Cost?

Full coverage is naturally going to cost more than liability-only insurance, but the gap may be less than you imagine. Full coverage in the U.S. typically costs between $1,700 and $2,000 annually, although your premium will depend on such factors as:

• Where you reside
• Your record as a driver
• Your credit history (in most states)
• The car you drive
• The deductible you opt for
  

Picking a bigger deductible than what you'd pay yourself in the event of a claim  can reduce your premium. But just be sure it's a figure you could easily afford if your vehicle were wrecked or stolen.

Personalizing Your Policy

You may be able to tailor your coverage to suit your needs and budget. For instance:

• If your vehicle has poor resale value, it may be time to cut back on collision or comprehensive.
• If you're interested in saving on a month-to-month basis, increasing the deductible may be the way to go  if you have a rainy-day fund saved up.
• If you reside in an area with many uninsured motorists, purchasing uninsured/underinsured motorist protection can be a good idea.

You can strike the right balance by speaking with an agent or utilizing an online quote tool.

When to Drop Full Coverage?

A good rule of thumb? If the cost of full coverage for the year is more than 10% of your car’s value, it may not be worth keeping. So if your vehicle is worth $4,000 and you’re paying $500 a year in full coverage, it might be time to switch to liability only.

But don't make the switch too fast. Think about what it would be to fix or replace your car yourself and whether you're prepared to risk it financially. If a major wreck would leave you stranded without transportation, keeping full coverage around for a while longer might still be the smart choice.

Final Thoughts

Full coverage auto insurance can be very reassuring, but it's not some sort of magic umbrella that protects against absolutely everything. It's a good choice for many drivers  particularly those with newer or financed vehicles  but it's not always required. Knowing what it covers (and what it doesn't) will help you feel sure about your policy.

• Still not sure if full coverage is for you? At Savvital, we're here to guide you through your choices and create a plan that suits your car, your budget, and your lifestyle. Let's make insurance simple again.