Full Coverage Auto Insurance

What does “Full Coverage” auto insurance mean?

Many people don’t have an exact definition of what the term “Full Coverage” means when it comes to their auto insurance. And you may have heard your friends, family, or even your agent use the term “Full Coverage”, but what does it really mean?

Well, there’s a really short answer to this question. THERE IS NO FULL COVERAGE AUTO INSURANCE!

Yes, that’s right if you look in your declaration page of your auto insurance, where your coverages are listed, you will see many types of coverages such as Liability, Uninsured Motorist, Medical Payments, Collision Coverage, Comprehensive Coverage, even Rental Reimbursement and Roadside Assistance. Next to those coverages you will see different limits and deductible amounts, but you will not see a coverage called “Full Coverage”.

“Full Coverage” simply does not exist

Auto Insurance companies charge you a premium amount for a certain limit that they will pay, and they will not pay more than that limit unless you pay more. For example California liability has a minimum property damage of $5,000 and drivers go carry this minimum limit pay less than the driver who carries a liability limit of $500,000 for property damage, which is what most auto insurance companies provide as a maximum for liability. So if you crash into a vehicle and don’t have enough liability insurance to cover the damages to the other person’s vehicle, you can be sued and held liable for the difference.

Physical Damage coverage

Physical damage is the part of auto insurance that provides coverage for the value of the vehicle in case anything happens to it. It includes the Collision Coverage which covers the value of the vehicle in case it is in accident, and Comprehensive Coverage which covers anything else such as theft of the vehicle or fire. Comprehensive coverage is also known as Other-Than-Collision Coverage.

The Collision and Comprehensive Coverages have a deductible, which must be met first before the insurance company pays for the difference in repairs for the vehicle. For example, if your vehicle damages are $4,000 from an accident you have had, and you carry a Collision Deductible of $500, your insurance will pay $3,500.

Financed vehicles

If your vehicle is financed, the finance company will almost always require you to carry Physical Damage coverage on your vehicle until it is paid off. The reason for this is because they are technically still the owners of the vehicle until it is paid for in full. But, if your vehicle is not financed then the choice is often just up to you if you would like to carry the Physical Damage coverage.

The finance company usually does not care about how much liability you have, or even if you have any liability on your vehicle. But, leased vehicles are most often required to carry more than the minimum state required limits of liability by the leasing company. The reason for this goes beyond the scope of this article, but it again involves lawsuits and vicarious liability.

Should you get physical damage coverage if your vehicle is paid off?

Only you can make this decision, by having a thorough discussion with your insurance agent. Our best advice is to take a couple of things into consideration:

1. Do you have enough cash saved to buy another vehicle?

2. How much money are you saving by not purchasing this coverage?

Liability Insurance

Although the finance company may not care if you have liability insurance. The state does, and in California unless you have the minimum required limit of liability you cannot legally drive on public roads. But, just because you bought minimum legal liability limit does not mean that you are properly protected. If you do not have enough insurance, you may be exposing your assets and even risking wage garnishment from a civil suits in the event your insurance does not provide enough coverage to the other party if you are found at-fault in an accident.