Liability vs Full Coverage Car Insurance Explained
What each type of policy pays for, what the numbers on your policy mean and how drivers decide between them.
In this guide
Key takeaways
- Liability insurance pays for damage and injuries you cause to others, not for your own car.
- "Full coverage" usually means liability plus collision and comprehensive coverage.
- If your car is financed or leased, the lender usually requires collision and comprehensive.
- Minimum liability limits vary by state and may not cover a serious accident.
Introduction
When you shop for car insurance, two terms come up again and again: liability and full coverage. Liability is the basic coverage almost every state requires. Full coverage adds protection for your own car.
This guide explains what each one pays for, how to read the limits on a policy and the questions drivers ask when deciding between them.
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What liability insurance covers
Liability insurance pays for harm you cause to other people in an accident that's your fault. It has two main parts:
- Bodily injury liability: medical bills, lost income and legal costs for other people injured in the accident.
- Property damage liability: repairs to other people's cars and property, such as a fence or a building.
Liability does not pay to repair your own car or your own medical bills. Almost every state requires drivers to carry at least a minimum amount of liability coverage.
How to read liability limits
Liability limits are often written as three numbers, such as 50/100/50. Using that example:
- 50: up to $50,000 for injuries to one person
- 100: up to $100,000 in total for injuries in one accident
- 50: up to $50,000 for property damage in one accident
If the cost of an accident is higher than your limits, you could be personally responsible for the difference. State minimums are often quite low, so many drivers choose higher limits than the law requires.
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Not now, show me another guide →What "full coverage" usually means
"Full coverage" isn't an official type of policy. It's a common way of describing a policy that includes:
- Liability: for damage and injuries you cause to others.
- Collision: repairs to your own car after a crash with another vehicle or object, whoever is at fault.
- Comprehensive: damage to your car from things other than a collision, such as theft, fire, hail, flooding, falling objects or hitting an animal.
Even "full coverage" doesn't cover everything. Wear and tear, mechanical breakdowns and personal items inside the car are usually not covered.
Other coverage you may see
- Uninsured and underinsured motorist coverage: helps if you're hit by a driver with no insurance or not enough. Some states require it.
- Personal injury protection (PIP) or medical payments: helps with medical costs for you and your passengers. PIP is required in no-fault states.
- Rental reimbursement and roadside assistance: optional extras that cover a rental car during repairs or help with breakdowns.
- Gap insurance: for financed or leased cars, it can cover the difference between what you owe and the car's value if it's totaled.
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How deductibles work
Collision and comprehensive coverage come with a deductible: the amount you pay toward a claim before insurance pays the rest.
Example: your car needs $3,000 of repairs after a covered collision, and your deductible is $500. You pay $500, and your insurer pays $2,500.
A higher deductible usually lowers your premium, but it means paying more yourself if you make a claim. Choose an amount you could pay without difficulty.
Liability only or full coverage: what drivers consider
- Is the car financed or leased? If so, the lender usually requires collision and comprehensive.
- What is the car worth? Insurance pays up to the car's actual cash value, minus the deductible. For an older car with a low value, the cost of collision and comprehensive may be close to what you could ever receive from a claim.
- Could you replace the car yourself? If losing the car would cause real financial difficulty, the extra coverage can be worth the cost.
- Where do you live and park? Areas with frequent hail, flooding or theft make comprehensive coverage more valuable.
Some drivers use a rule of thumb: if a year of collision and comprehensive costs more than about 10% of the car's value, they consider dropping it. It's a starting point, not a rule.
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An example: who pays for what
Imagine you run a red light and hit another car. The other driver's car needs $8,000 of repairs, they have $6,000 in medical bills, and your own car needs $4,000 of repairs. Here's how coverage could apply, assuming a $500 deductible:
| Cost | Liability only | Full coverage |
|---|---|---|
| Other driver's car ($8,000) | Paid by property damage liability | Paid by property damage liability |
| Other driver's medical bills ($6,000) | Paid by bodily injury liability | Paid by bodily injury liability |
| Your car ($4,000) | You pay $4,000 | You pay $500, collision pays $3,500 |
Figures are for illustration only and assume costs are within your policy limits.
How to compare car insurance quotes
- Decide on your liability limits first, so every quote uses the same ones.
- Choose the same deductibles for collision and comprehensive on every quote.
- List the same drivers and vehicles, with accurate annual mileage.
- Ask about discounts, such as bundling with home insurance, safe driving and anti-theft devices.
- Check each insurer's complaint record with your state insurance department.
Price matters, but so does how an insurer handles claims. A slightly cheaper policy isn't worth much if claims are slow or difficult.
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Conclusion
Liability coverage protects other people from harm you cause, and it's required almost everywhere. Full coverage adds protection for your own car. Look at your car's value, any loan requirements and what you could afford to pay yourself, then compare quotes with the same limits and deductibles so you're comparing like with like.
Common questions
Is full coverage required by law?
No state requires collision or comprehensive coverage by law. Lenders and leasing companies usually require it for financed or leased cars.
Does liability insurance cover my car if someone else hits me?
Your liability coverage doesn't, but the other driver's liability insurance should pay for your damage if they're at fault. Uninsured motorist coverage helps if they have no insurance.
Does full coverage pay for a rental car?
Not automatically. Rental reimbursement is usually an optional extra you add to your policy.
Sources and further reading
This guide is general information, not insurance advice. Coverage, exclusions and prices vary by insurer, policy and state. Always read your policy and talk to a licensed agent or your insurer about your situation.
