🎯 Quick Decision Guide
Choose FULL COVERAGE if:
- âś“ Your car is worth more than $5,000
- âś“ You're financing or leasing
- âś“ You can't afford to replace your car
Choose LIABILITY ONLY if:
- âś“ Your car is worth less than $5,000
- âś“ You own the car outright
- âś“ You could replace it out-of-pocket
What's the Difference?
| Coverage Type | Liability Only | Full Coverage |
|---|---|---|
| Other people's injuries | âś“ Covered | âś“ Covered |
| Other people's property | âś“ Covered | âś“ Covered |
| YOUR car (collision) | âś— Not covered | âś“ Covered |
| YOUR car (theft, weather, vandalism) | âś— Not covered | âś“ Covered |
| Average annual cost | $600/year | $2,638/year |
Liability Insurance Explained
Liability insurance is required by law in 49 states (New Hampshire is the exception). It pays for damage you cause to OTHER people and their property—but nothing for your own vehicle.
Example Scenario
You rear-end someone at a stoplight. With liability-only insurance:
âś“ Covered: Their car repairs ($8,000), their medical bills ($15,000)
✗ Not covered: Your car repairs ($6,000)—you pay out of pocket
State Minimum Requirements
Most states require minimum limits like 25/50/25 (meaning $25K per person injury, $50K total injury, $25K property damage). However, minimums are often dangerously low—a serious accident can exceed these limits, leaving you personally liable.
⚠️ Warning: We recommend at least 100/300/100 coverage, even if your state only requires 25/50/25. The average injury claim exceeds $20,000, and you're personally responsible for anything above your limits.
Full Coverage Explained
"Full coverage" isn't an official term—it's shorthand for liability PLUS comprehensive PLUS collision coverage. This protects your own vehicle in addition to others.
Collision Coverage
Pays to repair YOUR car after an accident, regardless of fault. Includes single-car accidents (hitting a pole, rolling your car).
Comprehensive Coverage
Pays for non-collision damage: theft, vandalism, weather (hail, floods), fire, hitting a deer, falling objects.
Example Scenario
Same rear-end accident with full coverage:
âś“ Covered: Their repairs ($8,000), their medical bills ($15,000), AND your repairs ($6,000 minus your deductible)
The Math: When to Drop Full Coverage
The decision comes down to a simple calculation: Is the extra premium worth what you'd get back?
The 10% Rule
If your annual collision + comprehensive premium exceeds 10% of your car's value, consider dropping to liability-only. Example: If your car is worth $4,000 and comp+collision costs $600/year, you're paying 15%—probably not worth it.
Sample Calculation
| Car Value | Full Coverage Cost | Liability Cost | Extra for Full | Recommendation |
|---|---|---|---|---|
| $25,000 | $2,600 | $600 | $2,000 (8%) | Keep full coverage |
| $10,000 | $1,800 | $600 | $1,200 (12%) | Borderline |
| $5,000 | $1,400 | $600 | $800 (16%) | Consider dropping |
| $3,000 | $1,200 | $600 | $600 (20%) | Drop to liability |
When You MUST Have Full Coverage
đźš— Financing or Leasing
If you have a car loan or lease, your lender requires full coverage. They want to protect their asset. You can't legally drop it until the loan is paid off.
đź’° Can't Replace Out-of-Pocket
If losing your car would create serious financial hardship, keep full coverage regardless of the math. The peace of mind is worth it.
Frequently Asked Questions
What does "full coverage" actually include? â–Ľ
"Full coverage" typically means liability + collision + comprehensive. However, it's not an official insurance term, so always verify exactly what's included. It does NOT automatically include gap insurance, rental reimbursement, or roadside assistance—those are optional add-ons.
Can I drop collision but keep comprehensive? â–Ľ
Yes! This is actually a smart strategy for older cars. Comprehensive is much cheaper than collision and covers theft, weather damage, and animal strikes. If you park outside in a hail-prone area or high-theft neighborhood, keeping comprehensive while dropping collision can be a good middle ground.
How do I find my car's actual value? â–Ľ
Use Kelley Blue Book (kbb.com) or NADA Guides to find your car's "private party value"—what you could realistically sell it for. This is what insurers use to calculate payouts, not what you paid for it or what dealers charge.
Does liability cover me if the other driver is at fault? â–Ľ
If the other driver is at fault, their liability insurance should pay for your damages. However, if they're uninsured or underinsured (about 13% of drivers are), you'd need uninsured motorist coverage—another important add-on to consider even with liability-only policies.
The Bottom Line
Full coverage is essential for newer cars, financed vehicles, and anyone who can't afford to replace their car out-of-pocket. Liability-only makes sense for older vehicles worth less than $5,000, owned outright, where you're essentially betting your premium savings against the car's value.
Whatever you choose, don't skimp on liability limits. State minimums are dangerously low—we recommend at least 100/300/100 to protect your assets in a serious accident.