The Truth About ‘Full Coverage’ Auto Insurance: Why It Might Not Be What You Think
What Full Coverage Doesn’t Include
Even though the term “full coverage” sounds like you’re getting protection for all situations, there are several important aspects that are not included in most full coverage policies.
Personal Injury Protection (PIP) or Medical Payments Coverage (MedPay)
While liability insurance covers bodily injury to others, it does not cover your own medical expenses. Personal Injury Protection (PIP) or Medical Payments Coverage (MedPay) is needed to cover your own medical bills if you’re injured in an accident, regardless of fault. These are important add-ons, especially if you don’t have health insurance or if your health insurance doesn’t cover car accident injuries. However, they are not included in every full coverage policy.
Uninsured/Underinsured Motorist Coverage
If you’re involved in an accident with a driver who doesn’t have enough insurance (or any at all), uninsured/underinsured motorist coverage can protect you. This type of coverage is essential, especially if you live in an area with a high number of uninsured drivers. While this coverage is important, it’s usually an optional add-on to your policy and isn’t automatically included in full coverage.
Gap Insurance
If you have a car loan or lease, gap insurance is an essential add-on. This coverage helps pay the difference between what your car is worth (its actual cash value) and the amount you owe on your loan or lease if the car is totaled. If your car is totaled and it’s worth less than your loan balance, gap insurance ensures that you won’t be left paying the difference out-of-pocket. This is not included in standard full coverage policies and must be purchased separately.
Roadside Assistance and Rental Car Coverage
While many insurance providers offer roadside assistance and rental car reimbursement as optional add-ons, these are not part of standard full coverage. Roadside assistance can help with flat tires, lockouts, or battery jumps, while rental car coverage reimburses the cost of a rental car while yours is being repaired due to an accident. Depending on your needs, adding these coverages can provide valuable protection, but they aren’t automatically included in full coverage policies.
Why Full Coverage May Not Be Right for Everyone
Full coverage can be a smart option for drivers with new, high-value vehicles or those who want peace of mind. However, it may not always be the most cost-effective or necessary option for everyone. Here are some factors to consider:
The Age and Value of Your Car
The primary reason to carry collision and comprehensive coverage is to protect the value of your car. However, as your car ages and its value decreases, the cost of maintaining full coverage may outweigh the benefits. If your car is worth only a few thousand dollars and you’re paying hundreds of dollars each year for collision and comprehensive coverage, it might not make sense to continue paying for these protections.
Cost vs. Benefit
Full coverage tends to come with higher premiums than liability-only insurance. If your car is older and has a low market value, you may find that the cost of collision and comprehensive coverage is simply not worth the expense. In such cases, liability-only insurance might provide the financial protection you need without the added cost of full coverage.
Risk Tolerance and Financial Situation
Some drivers may be comfortable taking on a higher risk and opting for lower levels of coverage to save on premiums. If you have an emergency fund and can afford to pay out-of-pocket for repairs or a replacement vehicle, you may choose a higher deductible or lower levels of coverage. Conversely, if you rely heavily on your car or cannot afford a major repair bill, full coverage might be the right choice for you.
In the next section, we’ll discuss how to assess whether full coverage is the right option for your specific needs and how to build a policy that fits your financial situation.
Conclusion
When it comes to auto insurance, the term “full coverage” is often misunderstood. While it may sound like the most comprehensive and protective option, it’s important to remember that “full coverage” is not a one-size-fits-all solution. It typically refers to a combination of liability, collision, and comprehensive coverage, but it doesn’t cover everything—and it can vary from one provider to another. Some critical protections, such as personal injury protection, uninsured motorist coverage, or roadside assistance, are not included in standard full coverage policies, and may require additional add-ons.
As you consider your own auto insurance needs, take time to assess your car’s value, your driving habits, and your financial situation. For drivers with older cars, high-mileage vehicles, or minimal financial risk, carrying full coverage may not always be the best or most cost-effective choice. On the other hand, if you have a new car, a car loan, or simply want peace of mind, full coverage could be a smart option.
The key takeaway is that the best coverage is the one that matches your specific needs. You don’t have to settle for “full coverage” simply because it’s labeled as such. Take the time to review your policy, understand the protection it provides, and adjust it based on your situation. Ask your insurer about additional options and discounts that may lower your premium while still offering the protection you need.
Ultimately, your auto insurance should reflect your unique circumstances—your car’s value, how often you drive, where you live, and what you’re able to pay for out-of-pocket in the event of an accident. By being proactive and informed about your coverage, you can find the right balance of protection and cost, ensuring that you’re not overpaying for coverage you don’t need, while still being adequately protected for the risks you face.
