What Makes an Insurance Policy Full Coverage?
Demystify 'full coverage' insurance. This guide explains its key elements and how to tailor a policy that truly protects you.
When seeking auto insurance, “full coverage” is a common term for a comprehensive policy. However, it does not refer to a single, standardized product. Instead, it signifies a combination of insurance types that offer broad protection against various risks, covering potential damages to your vehicle, injuries to others, and medical expenses. This article clarifies the individual components that generally constitute “full coverage” in auto insurance.
Understanding Core Coverage Components
Liability coverage forms the foundation of nearly every auto insurance policy, protecting you financially if you are at fault for an accident. It is divided into two main parts: bodily injury liability and property damage liability. Bodily injury liability helps cover medical expenses, lost wages, and legal fees for other individuals injured in an accident you cause. This coverage applies to injuries sustained by people in other vehicles, pedestrians, or even unrelated passengers in your own car.
Property damage liability covers the cost of repairing or replacing another person’s property damaged in an accident for which you are responsible. Most states mandate a minimum amount of both bodily injury and property damage liability coverage.
Collision coverage is designed to pay for damage to your own vehicle resulting from a collision, regardless of who is at fault. This includes incidents like hitting another vehicle, striking an object such as a tree or guardrail, or your car rolling over. If your vehicle is financed or leased, lenders often require collision coverage to protect their interest in the asset.
Comprehensive coverage, sometimes called “other than collision” coverage, protects your vehicle from damage caused by non-collision events. These events include theft, vandalism, fire, natural disasters like hail or floods, and striking an animal. Like collision coverage, comprehensive coverage may be required by a lender if your vehicle is leased or financed.
Common Supplemental Coverages
Beyond the core components, many “full coverage” policies include additional protections. Uninsured Motorist (UM) and Underinsured Motorist (UIM) coverage protect you if you are involved in an accident with a driver who has no insurance or insufficient insurance. UM coverage covers your medical bills and, in some states, property damage if the at-fault driver is uninsured or a hit-and-run driver. UIM coverage applies when the at-fault driver’s liability limits are not high enough to cover your total damages or medical expenses.
Medical Payments (MedPay) coverage and Personal Injury Protection (PIP) are two options that help cover medical expenses for you and your passengers, regardless of who caused the accident. MedPay covers medical bills, such as ambulance services, emergency room visits, and hospital care. PIP, which is often mandatory in “no-fault” states, offers broader protection, covering medical expenses, lost wages, and other related expenses.
Customizing Your Policy
Policyholders can tailor their “full coverage” by adjusting financial aspects and adding optional coverages. A deductible is the amount you agree to pay out of pocket before your insurance coverage begins to pay for a covered loss. Choosing a higher deductible generally results in lower monthly premiums. Conversely, a lower deductible means higher premiums but less out-of-pocket expense at the time of a claim.
Coverage limits represent the maximum amount your insurer will pay for a covered claim. Increasing liability limits beyond state minimums provides greater financial protection in the event of a significant accident.
Beyond these adjustments, popular add-ons include rental car reimbursement, which covers the cost of a rental vehicle while your car is repaired after a covered incident. Roadside assistance provides help with services like towing, jump-starts, or flat tire changes. Another option is gap insurance, which covers the difference between your vehicle’s actual cash value and the amount you still owe on a loan if your car is totaled.