Liability vs Full Coverage Car Insurance 2023: Which Is Better?

When choosing between liability vs. full-coverage car insurance, it is important to understand the differences between the two. When comparing liability vs. full-coverage car insurance costs, premiums cost $650 and $1,176 annually, respectively. Should you cause an accident, liability insurance can help pay for the other driver’s repairs. Unfortunately, liability does not cover damage to your car. Full-coverage auto insurance is what you need for that level of safety.

Liability vs Full Coverage: Key Differences

When comparing liability and full-coverage auto insurance, the most notable distinctions are:

Accidents that hurt other people or damage their property can lead to liability claims. Liability insurance protects you from these claims. Full-coverage auto insurance protects your vehicle in the event of an accident, regardless of who is at fault, as well as for other types of damage. There are a few times when you need full coverage, like when you finance or lease a car, but almost always you need liability insurance.

Comprehensive Analysis of Liability vs. Full Coverage Insurance

The sections below provide a thorough explanation of each type of car insurance coverage to further highlight the distinctions between liability vs. full coverage:

Liability Car Insurance

This is to help cover costs in the event that you are found to be at fault in an accident that results in a third party sustaining bodily injuries or property damages. The intention behind this is to assist in covering those costs in the event that this occurs.

What Does Liability Insurance Cover?

Insurance companies place caps on various forms of liability protection for vehicles. Limits for bodily injury are calculated separately for each individual and each incident. If an accident causes more financial harm than your policy can cover, you will be responsible for covering the difference. Liability insurance is typically presented as a range of numbers, like 25/50/10. So, to break it down:

$25,000 of bodily injury liability per person
$50,000 of bodily injury liability total per accident
$10,000 of property damage liability per accident

There are two different types of coverage included in liability insurance:

Bodily injury liability coverage: This provides coverage in the event that you are held accountable for an accident that left one or more people with medical bills, lost wages, legal costs, and pain and suffering.

Property damage liability coverage: You will not have to worry about paying for someone else’s car repairs or mailbox replacements if you cause an accident that damages their property. Additionally, it can cover the costs of your legal defense in the event that you are sued.

What Does Liability Insurance Not Cover?

Expenses if you or a passenger in your car suffer an injury
Repairing your vehicle after a collision that was your fault
Uninsured or underinsured drivers have caused damage to your car.
Claims that exceed your insurance liability cap

Is Liability Insurance Required?

Of the 50 U.S. states, 48 require liability car insurance or something similar, though the amounts and types of coverage needed vary. There are two exclusions:

You are not required to have insurance in New Hampshire, but you do need to be able to demonstrate that you have enough money to meet the state’s minimum standards for financial responsibility.
You can opt out of having the bare minimum liability coverage in Virginia by paying a $500 annual uninsured motorist fee.

There will be a minimum amount of liability insurance that your state requires. In reality, though, the state minimum may not be enough, especially if you cause a big, expensive accident.

Full-Coverage Car Insurance

Some states require that you have certain types of coverage on your car, but “full-coverage car insurance” usually means a policy that goes above and beyond what the law requires. In some cases, full-coverage auto insurance may also imply higher limits than what the law or other insurance packages require.

What Does Full-Coverage Car Insurance Cover?

The term “full coverage” typically refers to the purchase of three different types of insurance:

Collision car insurance coverage: If you have collision coverage, your insurance company will help pay to fix or replace your car if you are in an accident by yourself, with another car, or with something fixed, like a light pole.

Comprehensive car insurance coverage: Comprehensive car insurance can help with the cost of repairing a car that has sustained damage other than from a collision. Examples include damage from water, fire, animals, thieves, and even falling branches.

In most cases, the combined coverage of collision and comprehensive insurance will be sufficient to pay for the costs of fixing or replacing your vehicle. Depending on the laws in your state and the policies offered by your insurer, complete coverage may also include

Personal injury protection (PIP) insurance or medical payments (MedPay) insurance: This is available in the event that you or your passengers sustain injuries as a result of an accident. This supplemental coverage will reimburse you and your passengers for expenses such as doctor’s bills and lost wages in the event of an accident or illness.
Coverage for uninsured or underinsured motorists, abbreviated as UM/UIM, protects your vehicle from drivers who leave the scene of an accident without providing their insurance information, as well as those who do not have enough insurance.
Other forms of coverage, such as towing, roadside assistance, pet coverage, rental cars, and gap coverage, are some of the optional coverages that can be purchased to cover the difference between the amount that you owe on your loan or lease and the amount that you receive from an insurance payout.

What Does Full-Coverage Car Insurance Not Cover?

It is important to inquire about what is and is not covered under the policy because full-coverage packages can differ depending on the issuing company. There is no such thing as a one-size-fits-all policy that protects against any and all hazards and contingencies. The use of your vehicle for ride-sharing, for instance, is likely to be an exclusion in your policy that could result in a claim being denied.

Full-Coverage Car Insurance Price

The cost of full-coverage auto insurance is subject to a variety of factors in the same way that the cost of liability coverage is. According to the most recent data provided by the NAIC, the annual premium in the United States averages $1,176, which equates to $98 per month.

Is Full-Coverage Car Insurance Required?

Although there is not a single state that mandates full-coverage auto insurance, having it could be beneficial in the following circumstances:

Bank or other financial institution: Your financial institution may require you to maintain collision and comprehensive coverage on your vehicle until the full balance of the loan is paid off.
If you lease a car, the leasing company may insist that you maintain collision and comprehensive coverage on the vehicle until the lease is up.
Employers: A few employers might insist that job applicants have comprehensive insurance.

Which Is Better: Liability Insurance vs. Full Coverage?

Choosing between liability and full-coverage auto insurance? Think about these five things first.

#1. Compulsory Pre-requisites

Find out what kind of insurance your lender requires or what the law mandates. Having liability insurance is a legal requirement in most states. Creditors want full coverage, and sometimes they have specific deductibles. After you have paid off your car, though, your situation and personal preference will determine whether you still need full coverage and what kind of deductible you are comfortable with. Also, keep in mind that collision and comprehensive insurance are two different things. If you only need one of these, you do not have to include the other.

#2. Risks and Risk Tolerance

It is more important to have a diverse coverage portfolio when you have a higher risk of being involved in a collision.

#3. Premiums

Car insurance policies that only provide liability coverage typically have lower premiums than comprehensive policies. If you choose to have full coverage, your monthly premiums will be significantly higher—roughly twice as much, on average. On the other hand, you will be afforded a greater degree of protection against accidental damage to the vehicle. When an insured vehicle is more valuable, a frequent target of thieves, or needs extensive repairs, the premiums for comprehensive auto insurance are typically higher.

#4. Limits

Policyholders have the ability to select the liability limits that apply to you. You have the option of elevating the maximum amount of liability coverage that is included in your comprehensive auto insurance policy. You can not pick the limit for comprehensive and collision coverage, though; the amounts are based on how much the car is worth.

#5. Car Value

It also matters how much your car is worth. Carefully consider whether the settlement amount is enough to cover the costs of your car insurance if it were comprehensively damaged. If someone hurts your car, would you rather pay for repairs out of your own pocket or get a new one without getting paid by your insurance company? Newer, more expensive vehicles benefit more from comprehensive coverage.

Liability vs Full Coverage: Car Insurance Cost

The cost you pay for liability vs. full-coverage car insurance depends on many factors, including your age, vehicle, driving record, state, and city. Liability insurance alone is less expensive than a full-coverage policy because it covers only the most common types of accidents. It is possible to add collision and comprehensive coverage to your liability policy for a low additional premium.

Cost of Liability Insurance

According to data compiled by the NAIC, the typical annual premium for liability insurance in the United States comes in at around $650. However, there are a number of variables that will affect the final price tag, such as:

Both your age and your driving record
Type of Car
Your location
The level of liability protection you purchase
Your claims history

In some states, such as California, Hawaii, Massachusetts, and Michigan, insurance companies are prohibited from considering applicants’ credit scores when making coverage decisions.

At What Point Is Full Coverage Not Worth It?

If the deductible for your comprehensive coverage is higher than the value of your car, you may want to consider dropping it.
Your car is getting old, or you want to get a new one soon.
Your car is not worth much.
The money you get for replacing a five- or six-year-old car probably is not worth what you pay in premiums.

The value of your car goes down as it gets older. When your car is older than 10 years, it is usually not worthwhile to pay for comprehensive insurance. Before committing to full-coverage insurance, it is important to determine if the premiums will be worth the value of your vehicle.

Is It Better to Have Liability or Full Coverage?

Your lender or dealer may insist that you purchase full-coverage car insurance if you are leasing or financing your vehicle. You are not required to purchase full-coverage insurance if you are the sole owner of the vehicle. Full-coverage insurance is more expensive, but well worth it if your car is relatively new and expensive, or if you would have trouble replacing it if it were stolen or totaled. Carefully assessing your needs is essential before deciding between full coverage and liability only.

People who drive older, lower-value vehicles and who have sufficient savings to cover repair or replacement costs in the event of an accident are the most likely candidates for liability-only insurance policies.

People who have a newer, more expensive car, do not have enough savings, or do not want to deal with the hassle of paying for repairs or a replacement vehicle after an accident should look into purchasing full coverage.

What Does Liability Only Mean in Car Insurance?

Third-party car insurance is another name for liability-only coverage because it only pays for other people’s injuries and property damage. In the event that you cause harm to another person’s property or person in an accident, this minimum level of insurance coverage will protect you financially.

If you cause an accident and someone is injured or their property is damaged, liability-only auto insurance will cover those costs up to your policy’s limits.

What Are the Disadvantages of Full-Coverage?

When it comes to automobile insurance, the premium for liability-only coverage is typically less expensive than the premium for full coverage. Additionally, deductibles might be quite expensive; with liability-only insurance, you will not be responsible for paying a deductible.

Last but not least, if you drive an older vehicle, full-coverage insurance may not be worth the cost. A full coverage policy is not necessary for someone who only drives occasionally or for short distances.

When Should You Have Liability Only Insurance?

It is inevitable that your car’s value will decrease as it ages. At some point in the future, it may no longer be economically advantageous to maintain a comprehensive insurance policy. In most cases, 10 years is a good time to think about making the switch from full coverage to liability-only insurance. To legally operate a motor vehicle in the majority of states, you are required by law to have liability coverage.

Should I Go Down to Liability Insurance?

When it comes to your car insurance, there will come a time when paying for collision and comprehensive coverage is no longer financially worthwhile.

Why Do You Need Liability Coverage?

If you cause harm to another person or cause damage to their property, liability insurance can help cover the costs. Most insurance policies, such as those for cars and homes, automatically include liability protection.

Why Should You Buy Liability Insurance?

If you cause bodily harm to another person or damage their property and are found legally liable for their care, liability insurance can help pay for their medical bills and defend them in court. Almost every state has some sort of minimum liability insurance requirement for drivers.

Do You Need Full-Coverage Car Insurance?

Most states mandate at least minimum liability coverage for drivers but do not mandate comprehensive coverage. Full-coverage insurance is usually recommended, but there are circumstances when it is unnecessary. Whether you should get liability insurance or full coverage is largely a matter of how much money you have and how much your car is worth.

Liability Car Insurance vs. Full Coverage: Conclusion

Take into account your own and other people’s safety needs when deciding between liability and full-coverage auto insurance. Liability insurance only protects other drivers and passengers, not you or your vehicle. Your full-coverage auto insurance policy will protect you, your car, and any other parties involved in the accident. If you drive a car, you absolutely need liability insurance. It is frequently required by law, doesn’t cost much, and protects you and others from financial ruin in the event of an accident. However, it is not always necessary to have a comprehensive plan in place.