Coverage 101

Liability vs. Full Coverage: Which One Do You Need?

“Full coverage” is not an official policy type. Here is what the phrase actually bundles, and how to decide when it is worth the premium.

Written by

Marcus Reyes

Coverage Analyst · CPCU

Reviewed by

Priya Nadkarni

Managing Editor · Licensed P&C Agent

Last updated May 2024

6 min read

What “full coverage” really means

No insurer sells a product literally called “full coverage.” The phrase is shorthand for a policy that combines your state-required liability with collision and comprehensive. That is it — three coverages people bundle under one convenient label.

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When liability-only makes sense

If your car is older and paid off, and you could comfortably replace it out of pocket, liability-only can be a rational choice. The savings from dropping collision and comprehensive may outweigh a payout that would be capped at a low actual-cash-value figure anyway.

When full coverage is worth it

If you are financing or leasing, your lender almost certainly requires collision and comprehensive. And even on a paid-off car, full coverage makes sense whenever losing the vehicle would be a genuine financial hardship.

Sources

  1. 1.Insurance Information Institute — What is covered by a basic auto policy

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