- First part of full coverage: liability insurance
- Uninsured/underinsured motorist BI and PD insurance
- Second part of full coverage: first-party benefits
- Personal Injury Protection
- Collision insurance and comprehensive insurance
- The total cost of full coverage car insurance
- Why you should get full coverage
- How to make full coverage more affordable
Full coverage car insurance is a term that describes having all of the main parts of car insurance including Bodily Injury, Property Damage, Uninsured Motorist, PIP, Collision and Comprehensive. You’re typically legally required to carry about half of those coverages. Having the whole package is called “Full Coverage”, and some people opt for it to get greater financial protection. In this article, we go into length on what makes up full coverage, and why you should consider getting it, even if you do not have to.
Table of contents
First part of full coverage: liability insurance
Liability insurance covers damages you are at fault for and cause to another driver or their car. It is the only part of car insurance that you are required by law to carry. Within liability, the two main types of insurance are bodily injury (BI) and property damage (PD) liability insurance. Bodily injury deals with injuries you cause to the drivers themselves, while property damage is any damage you cause to another vehicle, or structure. Neither coverage is meant to protect you or your car; they are exclusively for other drivers to file a claim against your insurer.
Having these two coverages is the most basic type of car insurance you can carry. Each state institutes a state minimum, which is written in a three number format like 25/50/25. The first two numbers refer to your BI coverage, where the first is the limit of insurance you have for one person in an accident, while the second is the limit for the entire accident. The third number is the limit for your property damage liability coverage.
State minimums usually range from $10,000 to $50,000 worth of coverage for each state. Overall, liability is not the cheapest, but certainly not the most expensive component of car insurance. To double your limits for bodily injury, it will probably cost less than an extra $100 per year. PD insurance is slightly more expensive than BI but costs less to boost coverage.
Uninsured/underinsured motorist BI and PD insurance
Uninsured BI and PD, functions exactly as BI and PD coverage, except it is only used in the event you get into an accident with a driver without car insurance, who was found to be “at-fault”. In most cases, you would just ordinarily file a claim through the other driver’s insurance. Since they do not possess any, you would need to file through your own Uninsured Motorist coverage instead. Underinsured Motorist BI and PD are used in the event the other driver does have insurance, but not enough to cover your expenses. First, you would file for reimbursement up to the other driver’s limits, then through your Underinsured Motorist to make up the rest of the damage costs.
Second part of full coverage: first-party benefits
Within first-party benefits are several types of insurance which constitute the second part of “full coverage”. For most states, first-party benefits coverage is optional to carry. It is also generally more costly, but its biggest advantage is that you can use it for your own damages and medical expenses much faster.
Personal Injury Protection
You can think of personal injury protection insurance as BI for your own injuries. If you were injured in a car accident, rather than needing to file through the other driver’s BI insurance, you can file through your own PIP to pay for your medical expenses. The main benefit to PIP is that it pays out regardless of who was at fault. PIP tends to overlap often with your own health insurance, and usually works as a useful complement and provides extra protection.
In 12 states, you are required to carry around Personal Injury Protection (PIP), while in the other 38, it is optional. The states where PIP is mandatory generally make those states more expensive for car insurance. In Florida, you could expect to pay an extra $25 to $90 per year for PIP, though it should be noted that Florida insurance requirements include one of the lowest limits for PIP among the states where PIP is required. The cost will most likely be greater depending on the limits your state offers. In Michigan, for example, when state laws required drivers to carry unlimited PIP, costs may exceed $4,000 per year.
MedPay is essentially the same thing as PIP insurance, except that it is not mandatory in any state. MedPay is a mostly redundant coverage in “no-fault” states but can be very important in states with low PIP limits, or where PIP is expensive.
Collision insurance and comprehensive insurance
You can think of collision insurance as PIP for your car. Regardless of who is at-fault, you can file through your collision insurance to repair any damage to your car caused by an accident. You do not need to wait for another driver’s insurance company to pay out, meaning your car can get repaired quickly.
The downside to collision insurance is that it is usually the costliest part of car insurance — sometimes encompassing over half of the total bill. For cars of high value, the price will be even higher. Luckily, you can control the price of your collision premium by opting for a high deductible. Deductibles usually range from $50 up to $2,000. The higher you opt for, the cheaper your premium will be. Collision insurance is not mandatory from a legal standpoint, but if you lease your car, the leasing company may require that you hold this coverage.
Comprehensive coverage is similar to collision, except that it only covers damage to your vehicle caused by external causes. Colloquially known as “Acts of God”, such events include a branch falling on your car, someone vandalizing your car, or an errant baseball going through your windshield. These events are, for the most part, unavoidable. Comprehensive coverage costs far less than collision, most likely due to the average comprehensive claim being far smaller than collision claims. Price can also be controlled with a higher or lower deductible.
The total cost of full coverage car insurance
Full coverage insurance is significantly more expensive than basic coverage, mostly due to the inclusion of collision and PIP/MedPay insurance. We got a quote for a 30-year-old male driver from New York, to show how each individual component breaks down in price. For this quote, full coverage (not including PIP since that is mandatory in New York) cost 86% more and added an additional $251 per six months, or $502 for the year.
We looked at five major cities, to see how costs between basic and full coverage differed. In every city, the cost of getting full coverage was more than double the cost of basic, state minimum coverage.
In the case of Massachusetts, full coverage was nearly triple the costs of basic coverage. Is it really worth it to pay so much more for coverage, that, by law, you are not required to have?
Why you should get full coverage
In the event of an accident, opting for only liability insurance and forgoing the “first-party” benefits of full coverage, means a long, uncertain claims process where you have to deal with another insurer rather than your own. Filing through another person’s insurer means there is a higher chance the claim may not be approved, or you may have to settle for an amount less than what you wanted. Filing through another insurer also means needing to prove who the “at-fault” driver, which in many cases, can be difficult to determine, and sometimes depends on the state you are in. Still, if it is expensive to get full coverage, is it even worth paying all of that money for something that is unlikely to happen? The short answer is yes.
From 2004 to 2013, the average collision claim was $3,144 while the average comprehensive claim was $1,621. What that means, is that if you were to get into an average accident, the damage could be about $3,100 worth. If you were the at-fault driver as well, you are going to need to pay for those damages yourself. If your car is your main means of travel as well, then it may affect how you get to work, which can cost you even more in lost wages. The average car accident also cost over $60,000 in medical bills in 2014.
There is an inherent risk in hoping that someone else’s insurance will be able to cover that full amount. Not to mention it can take weeks or months before you actually see a pay out for your medical bills if you go through another driver’s insurer. At least with PIP, you know for certain you are covered up to a certain amount and can see payment as soon as you file the claim.
How to make full coverage more affordable
Full coverage is expensive but can be more affordable. There are several things you can do that can save you on your yearly bill. The first is to control your deductible on your collision and comprehensive coverage. As we mentioned above, the lower the deductible, the more you will pay every month. If you set aside some money in your savings account for your deductible, perhaps you can raise it a bit and thus have easier monthly payments.
The next thing you can do is make sure you apply for any discounts you may qualify for. Insurance companies, especially the large ones, have well over 20 discounts for a variety of different reasons. Whether you’re a proven safe driver, a good student, have taken a drivers education course, or you can bundle your car policy with another insurance policy, the combined discounts can save you well over 20% on your yearly bill.
The last, and possibly best advice to make full coverage cheaper is to shop around. Quotes comparison shopping can save you thousands every year on your car insurance bill. In any area, there are numerous companies competing for your business, and they’ll most likely differ in price by several hundred dollars. You will never know if you are getting the best car insurance if you are not comparing quotes from several companies. We have always found a company in any given area offering a price well below other competitors — you just need to be diligent enough to find them as well.