Oftentimes when you hear people talking about car insurance, you hear them say that they are carrying “full coverage” insurance on their vehicle. The truth is, however, that there is no such thing as full coverage car insurance. Instead, that term is commonly used to refer to car insurance that includes liability, comprehensive and collision insurance. Let’s take a closer look at each of these types of coverage.
Liability insurance covers any damage that was done to another person or their property as the result of an accident that you caused.
Collision coverage helps pay for the damage to your vehicle if you are in an accident that is your fault. Without collision, your vehicle’s repairs may not be covered if you are responsible for the accident.
Comprehensive coverage provides further protection for your vehicle, covering the cost of repairs for damage that was caused by falling tree branches, weather or other non-accident related events. It also provides coverage against theft.
When people talk about carrying full coverage car insurance, they typically mean that they are carrying a combination of liability, collision and comprehensive insurance. This helps ensure that any damages to other people’s vehicles or to their own vehicles are covered, regardless of whether or not they were at fault.
Oftentimes when you purchase a new vehicle, the bank or lender will require you to carry full coverage insurance on your vehicle until it is paid off. Because the vehicle is used as collateral for the loan, the lender wants to make sure that they won’t lose that collateral if the vehicle is damaged in an accident or stolen. By carrying liability, collision and comprehensive insurance, they can help protect themselves in case the vehicle is damaged.
Deciding whether or not full coverage is the right option for you depends a lot on the overall value of your vehicle. If you drive an old clunker, it may not be worth it for you to pay the extra money each month for additional coverage. If, on the other hand, you have a high-end car that is extremely valuable, chances are you will want to carry as much insurance on it as possible to protect your investment.
Your insurance agent can help you decide whether or not these types of insurance policies are a good fit for your needs. A good rule of thumb is to add up how much you would spend on full coverage insurance for a year. If it is higher than the value of the car, you should probably opt for basic coverage instead.Collision Car Insurance Coverage: Finding Your Policy
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