Liability Insurance vs Full Coverage: What's the Difference?

When shopping for car insurance, it is important to know what kinds of coverage are out there and what you need for your vehicle.

In the simplest terms, liability-only will cover the damage you might do to another person or property during an accident.

Full coverage insurance includes liability but also will cover any damage your vehicle sustains.

While liability-only premiums cost a little less, full coverage may be a better choice for you and your car. This article will help you figure out whether liability insurance vs full coverage car insurance for your perfect policy.

What is Liability Insurance?

Liability insurance pays out on claims that you cause.  In other words, if you are responsible for an accident, this part of your policy pays the people you hit.

Liability coverage does not have a deductible and it will usually cost more if you drive a bigger, heavier vehicle, like a truck.  

It can also cost more if you drive a high performance sports car.  

They will charge more if you drive a bigger vehicle because it's heavier and would cause more damage if you were to hit someone else with it.  

Sports cars have a higher rate because they tend to be driven more aggressively, which causes more accidents.  

Liability does NOT include coverage for any of your own injuries or damage your car might have as the result of an accident, it only protects you against damage that you are legally responsible to cover someone else for.

There are two different parts to liability coverage: bodily injury, and property damage.

Bodily Injury will cover some or all of the medical costs for a driver, any passengers or pedestrians injured in an accident that is deemed your fault. It does not cover any medical costs for you.

What Limits of Liability Coverage Should I Choose?

Insurance policies almost always set limits to coverage, which represent the highest amount the insurance company will pay on a claim.

You can usually set your limits, depending on how much you want to pay each month.

However, almost all states require minimum amounts of coverage for each section.

In your policy you will see these coverage limits written as a set of 3 numbers. 

The first is the highest amount the policy will pay for injuries to each individual hurt in the accident. The next is the total the policy will pay for all people hurt in the accident. 

The last number is the limit the policy will pay for damage to someone’s property for that accident.

For example, if you saw your policy had a limit of 30/60/30, that would mean:

These limits are each per accident. 

Some car insurance companies will also offer a “Combined Single Limit” of coverage.

The coverage description would look like this on a quote:

$100,000 CSL 

This gives you one pot of money to draw from for all damages you cause in an accident.

This flexibility is nice because it's hard to predict how much you will need to cover bodily injury vs. property damage after an accident.

What is Full Coverage Insurance?

Quick Insurance History Lesson…

Since I was a history major in college and I now work in the insurance business, I am going to give you a little story about the history of the term “full coverage”.

Back before the turn of the century, when auto insurance was pretty cheap, people used to buy car insurance with a $0 deductible on Comprehensive and Collision.  This was the original meaning of “Full Coverage”.

Since rates are so much higher now, almost nobody pays the premium to have a $0 deductible, so the phrase has morphed into meaning what it does today:  liability coverage, plus comp and collision.

What Is Best For Me? Liability Insurance vs Full Coverage Auto Insurance

Typically if you own an older car, you can get away with liability-only insurance. 

Some savvy insurance buyers take the money they save by deleting Comprehensive and Collision and invest it towards higher liability protection.

Since car insurance, like all kinds of insurance, is really only meant to be used in catastrophic events, its best to have enough coverage to handle these really big claims.

Most really big claims are liability related.  

Think of it this way:

You are at fault in a three car pile up on the Interstate.  

An eldery man two cars in front of you has a pre-existing back injury from a car accident he was in five years ago.  

He knows to get a lawyer immediately and start going after your insurance. 

The car immediately in front of you has a mom and her two sons.

The airbags have gone off in their car and they need to go to the hospital.  

You are liable for all four people’s injuries, plus the damage to their cars.  How much coverage do you think you need to handle all those hospital bills and to buy them new cars?  

With that being said, it is a good idea to think through the worst possible scenarios when selecting your coverage package.  

Liability only might be a wise investment of your premium dollars.

Another thing to think about...

If you happen to have an accident, an older car would end up costing more to fix than the value of replacing the car, so it doesn’t make sense to carry the extra insurance.

You might also risk liability-only if you aren’t someone who drives often, or if you park your car in a driveway, or better yet, in a garage.

However, it is a risk you take when you decide to forgo the extra coverage for your own property, so you should have a plan to replace your car without insurance if it is damaged during an accident.

Is Full Coverage Best for Me?

While carrying full coverage insurance is usually optional, it’s a smart idea to have it.

If you know you can’t afford to replace your car out of pocket if you’re in an accident, it’s better to pay higher premiums each month to ensure you will be able to replace or repair your car in the event of an accident.

When you own a more expensive car, it’s better to have a policy with comprehensive and collision, because repairs tend to be more expensive on higher end or newer vehicles. 

This makes it more difficult for people to pay out of pocket.

When you’re on the road often, whether it’s for travel or for work, or just because, full coverage is your best bet.

 The more often you’re out driving, the higher the chance of being involved in an accident.

There are some cases where full coverage might be required. 

If you are financing a car, generally a lender will require you to carry full coverage insurance, so the cost of the vehicle is covered in the event that you’re in a collision.

 When you’re leasing a car, it’s also typically required that you carry the extra coverage, with the name of the leasing company listed on the policy.

Full Coverage Premiums vs. Liability-Only Rates

Obviously, the more coverage you buy, the more it is going to cost.

Liability Only might be your best bet if your car is older or if you can afford to repair it out of pocket after an accident.

Liability Only coverage is going to be decided by the limits of coverage you buy, your driving history, where you live, how much you drive, and the type of car you own.  

Adding Comprehensive is usually not very expensive.  Maybe $70 for a year’s worth of coverage with a $500 deductible.

Adding Collision might be pricy.  If you have a newer car, it might be more than $600 a year, plus a $1000 deductible.

If you have a loan or lease, you may not have a choice. 

The bank or dealership would force you to carry these coverages because they have a stake in the vehicle too.

What it really comes down to is whether the coverage for your vehicle is worth it.

Ask yourself, if my car was damaged and not repairable, can I cover everything I still owe on it and buy myself a replacement vehicle? 

Quick Example:

If you own a 2010 Toyota Corolla with 140,000 miles on it, the thing is probably worth $2,000.

If you carry collision coverage, it would probably not cost much, maybe $150 a year.

But if you totalled it and made a claim, they would only pay you the depreciated value, minus whatever deductible is on the car.

So you might only end up getting $1,000 or less.  

Since you probably won’t total it, you could just be throwing money away insuring an old car with not much depreciated value.

This should clear up what you really need when it comes to insurance coverage.

Rates vary widely depending on your coverage needs and your personal risk.

On average, the additional expense of collision and comprehensive is about $850 per year, or an extra $71 per month.

Takeaways: Liability vs Full Coverage Auto Insurance

48 states require you to carry liability insurance in order to drive your car. 

This covers other people and their property involved in an accident that you are determined to be at fault for. 

Full coverage includes liability, as well as comprehensive and collision, which covers damages to your vehicle. 

You may be forced to carry Comprehensive and Collision if you have a loan or lease

Having the extra coverage for yourself makes sense for most people, since many would not be able to cover the additional expense of replacing their car without it.