It’s easy to shop around for the cheapest car insurance rate and think you’re getting a great deal. After all, who doesn’t want to save money? What you may be overlooking is what’s not included in a higher premium coverage. In general, if you’re opting for a cheaper premium by reducing your coverage limits, you could be responsible for out-of-pocket costs if you’re in an accident, or your vehicle is stolen or damaged.
One of the most important considerations when considering if you need full coverage insurance for your vehicle is to think about its value. If you’ve just driven off the lot with a newer, financed vehicle, chances are you’re going to need full coverage insurance. However, if you’re driving a vehicle nearing its last miles, a full coverage policy — and its cost — may not be worth it.
Learn more about what full coverage auto insurance covers, how it differs from liability car insurance and how to determine if you need higher limits for your vehicle.
- Full coverage is required if you are financing a vehicle or have a current auto loan. This protects the lender from a total loss.
- You may not need full coverage if your vehicle is older than 10 years, you don’t drive it much or at all or you couldn’t replace it financially if it was stolen or damaged.
- Determining your car insurance needs can be done with some cost analysis of your vehicle’s actual value, your budget, personal driving factors and your insurance needs.
Do you need full coverage car insurance?
When we’re talking about full coverage insurance, we’re discussing a combination policy of liability, collision and comprehensive car insurance. These coverage options protect you and another driver during an accident despite fault, including medical and vehicle costs, meet your state’s insurance requirements and provide coverage from theft, vandalism, natural disasters and fire. Full coverage is the most complete coverage option available,
In general, if you’re still making payments on your vehicle, you’ll be required to have a full coverage policy until your vehicle is paid off. Once you stop making payments on your vehicle, you can change your policy limits. However, you may not want to if you’re happy with the amount of protection you have on the road.
To determine if you should change your policy coverage, it can help to weigh your needs and your budget. For example, if you dropped some of your protections, could you afford damages out-of-pocket? Do you feel comfortable knowing your vehicle may not be covered if it’s stolen or damaged by a tree during a windstorm? Could you continue to pay the same amount for car insurance comfortably?
It’s also necessary to consider the cost of your vehicle and what you’re paying for coverage. If your vehicle is under $5,000 and it’s stolen, you may be wasting hundreds of dollars on premiums if it’s fully covered. However, if it’s worth more, you may need to calculate its worth compared to your premiums and if the cost is worth the additional spend.
To determine this, start with your car’s actual cash value, or ACV. Next, compare the ACV with your annual premium payment.
For Example:If you totaled your car and the payout would be $3,000, and you’re paying around $800 a year for comprehensive and collision, it might not be worth it. But if the payout is $15,000, it would be.
What is full coverage auto insurance?
When it comes to purchasing insurance, you typically have state minimum requirements (the most basic coverage option), liability car insurance (protections for the other driver and their property) and full coverage (protects all types of damages and accidents).
When considering which car insurance coverage may be best for you, it’s important to consider what protections you may need for yourself, your vehicle, the other driver, how much you can afford in premiums and what you can cover if you need to pay out-of-pocket.
According to the Insurance Information Institute, the average full coverage insurance cost for medium sedans was $1,694, compared with $1,529 for a medium SUV in 2022. The average insurance cost for all vehicles, including pickups and hybrid and electric vehicles, was $1,588.
When you understand the differences between liability and full coverage protections, it may help you determine what limits and car insurance fit your needs.
Full Coverage vs Liability Insurance
Most drivers choose one of two types of auto insurance: Liability car insurance and full coverage. Liability covers injuries and damages you cause to others and full coverage includes collision and comprehensive car insurance coverage.
The difference between the two comes down to having limited protection for damages and bodily injury should you be involved in a car accident. Additionally, some states have minimum levels of liability required in your state, which may mean you have varying levels of coverage based on where you live.
If you choose a liability coverage policy, you will purchase bodily injury liability car insurance and property damage liability car insurance in one policy. Under your coverage, the bodily injury car insurance will pay the medical bills of people you may injure with your vehicle during an accident. The property damage liability insurance pays for repairs or replacements of the other driver’s property you hit.
Full coverage provides both collision insurance protections and comprehensive insurance. The collision insurance will cover damages to your vehicle during an accident, even if you were found at fault. It will also cover a driver who doesn’t carry enough insurance to cover your vehicle’s damages.
Another protection under full coverage involves damages to your vehicle that occur from natural occurrences, such as fires, floods, hurricanes, falling tree limbs or collisions with animals, theft and vandalism.
Expert Tip:In general, we recommend limits of 100/300/100 with full coverage for most drivers. This means you have up to $100,000 for medical bills, bodily injury liability up to $300,000 per accident and up to $100,000 to repair the other driver’s vehicle and property that you damage.
Check out a detailed guide on liability vs. full coverage car insurance
When should you drop full coverage on your car?
Determining when to stop paying full coverage can feel a little like a guessing game. You’ve finished paying off your vehicle, so should you stop fully protecting it? Can you financially afford an accident’s repairs, or worse, could you replace your vehicle easily if it was stolen?
Before you decide to cut the cord on full coverage, ask yourself the following questions to help guide you.
How old is your car?
When trying to determine if full coverage is a good option for you, consider the age of your vehicle. If your vehicle is under 10 years old, it’s wise to purchase comprehensive and collision coverage.
The value of your vehicle is higher than the extra amount you’d pay in premiums per year and should be protected in case of an accident. However, if your vehicle is older, you may want to consider its actual value compared to what you’d spend on a full coverage policy. You can check your vehicle’s current value at Kelley Blue Book.
Can you replace or repair your car if it’s damaged or stolen?
Typically, if your vehicle is stolen there is a high possibility you’re not getting it back in one piece. Additionally, if you’re in an accident and your insurer deems your vehicle a total loss, you’re going to be car shopping.
Could you afford a new one without full coverage protection? If this would be a hardship, keep full insurance to prevent a sudden significant loss.
It’s also a good idea to determine if your yearly comprehensive and collision payment equals 10% of your car’s actual cash value. If it does, you may want to consider dropping the coverage.
Would you pay to fix your car if it had a major mechanical issue?
Car replacements and repairs aren’t cheap. With proper maintenance and care, your vehicle should keep going smoothly. However, vehicles are not foolproof. Your car’s radiator could go out or the drivetrain needs replacement, or the head gasket is done. These are high-cost repairs and replacements.
So, if a $1,200 repair isn’t worth it because your car is only worth $3,000, then maybe $600 a year in insurance payments isn’t either.
Check out the detailed guide on when to drop collision insurance and comprehensive coverage
7 step cost benefits full coverage analysis
We recommend taking a hard look at your finances and your vehicle’s value before deciding whether full coverage is a good fit for you or not. However, you might need some guidance on how to do that.
Consider the following seven steps as a guiding checklist to help you get started on this type of analysis.
1. Assess car value
Knowing how much your vehicle is worth can help you make decisions about your car insurance needs. If you are aware of how much your actual market value is, you can determine if you need full coverage car insurance. Here’s how to begin:
- Action: Use Kelley Blue Book or similar tools to find your car’s current market value.
- Details: Input details like make, model, year and condition for an accurate estimate.
- Expert tip: Regularly update your car’s value assessment, as it depreciates over time.
2. Estimate potential losses
After learning what your vehicle is worth, it’s time to think about what would happen if it was stolen or damaged. Estimate what your finances and budget are and how much you could afford in this type of situation. Then begin with the next steps.
- Action: Consider the costs of major repairs, total loss or theft.
- Details: Research common repair costs and the total loss value for your car model.
- Expert tip: Understand your area’s risk factors (e.g., theft, natural disasters) to estimate potential losses better.
3. Compare insurance premiums
In general, you should consider getting at least three car insurance quotes periodically. This provides you an opportunity to compare quotes and potentially save money if you find a cheaper rate. You can use the following steps to guide your process.
- Action: Get and compare full coverage quotes from multiple insurance providers.
- Details: Ensure each quote is based on the same coverage limits and deductibles.
- Expert tip: Look beyond price; consider the insurer’s customer service and claim handling reputation.
4. Evaluate deductibles
Deductibles are the amount of money that needs to be paid out-of-pocket before your coverage begins. In general, the lower the premium cost, the higher the deductible will be. Take a look at the following action items to determine how your deducible factors into the best coverage option for you.
- Action: Analyze how different deductible levels impact your premium and potential out-of-pocket costs.
- Details: Consider scenarios with low and high deductibles to understand their effect on premiums.
- Expert tip: Choose a deductible that you can comfortably afford in case of a claim.
5. Analyze personal risk factors
Insurance companies tend to assess risk based on several individual factors, including your personal driving record, age, gender, type of vehicle you drive and where you live. The more risky an insurer deems you, the more you may be looking at paying for premiums. Analyze your personal risk factors in the following steps.
- Action: Reflect on your driving frequency, history and parking situation.
- Details: More frequent driving or parking in high-risk areas might necessitate full coverage.
- Expert tip: Adjust your coverage based on changes in your driving habits or lifestyle.
6. Review financing requirements
If you’ve purchased your vehicle from a dealership, chances are you are required to carry full coverage car insurance until the car loan is paid in full. In general, this is to ensure that the lender is financially protected in case you get into an accident in your financed vehicle. Review the following steps to ensure you understand your financing requirements.
- Action: Check if your car loan or lease agreement requires full coverage.
- Details: Look for insurance clauses in your financing or leasing contract.
- Expert tip: Maintaining the required insurance is essential to avoid contract violations.
7. Make an informed decision
Now that you’re at the last step in your analysis, it’s time to put all your data together to decide what car insurance coverage meets your needs and your budget. Look at the final steps to help you decide what coverage type is best for you.
- Action: Decide if full coverage is financially justified based on your analysis.
- Details: Weigh the total cost of premiums against the benefits of full coverage.
- Expert tip: Regularly reassess your insurance needs, especially after significant life or vehicle changes.
Do you need full coverage insurance on a new or used car?
If you’ve bought a car new or used from a dealership or you’re making payments on an auto loan, you’ll need full coverage car insurance on the vehicle until it’s paid off. Sometimes, you may also have to carry gap insurance — which covers the difference between what you owe on your car and its actual cash value if it is damaged or totaled.
However, if you bought your used vehicle outright, you have the option to choose the type of coverage you think is best. Again, it helps to think about the ACV of your vehicle, consider the cost benefit analysis steps and make a decision. Remember, you can start with full coverage car insurance and then shop around at renewal time to find a better rate or coverage option.
Learn how car insurance rates differ for new and used vehicles
Is full coverage worth it?
It can be, based on your vehicle and the protections you need. Full coverage car insurance is a great value when you have a high-valued car that you’re heavily commuting in and have an increased risk of collisions or theft. The higher cost premium you pay in this instance will likely be worth the out-of-pocket you could pay with a higher deductible or liability-only policy.
However, it may not be worth it if your vehicle is lower in value, you’re covered on another person’s policy or it’s not driven much or at all. In these situations, you could look into dropping the collision insurance policy or determine if a liability-only policy would be a better fit for your needs.
How do you know if you have full coverage?
Full coverage insurance consists of both collision and comprehensive insurance coverage and meets your state’s liability coverage requirements. In essence, you have the top line of insurance coverage at a higher premium cost. You may also have a full coverage policy if you signed up years ago when you purchased your vehicle and didn’t change anything in your annual coverages.
If you’re unsure of your coverage, contact your insurer to discuss the limits and protections in place and what additional options you may have at this time.
How to shop for full coverage insurance
Shopping for full coverage insurance starts with contacting reputable insurance companies, such as Geico, Progressive, Nationwide, etc. You’ll want to share that you’re looking for a full coverage policy — it’s implied that you’re looking for collision and comprehensive coverage and that your state’s liability requirements will be covered. They likely will discuss what limits you are interested in. Again, we recommend starting with 100/300/100 with a $500 deductible.
In general, monthly premiums will vary based on your personal factors and the state you live in, but you can find cheaper full coverage car insurance for about $100 a month from auto insurers like Progressive, Geico and Travelers.
If you’re not at a place to pay for a full coverage policy nor need one, you can discuss adding on other optional coverages that will cost more than liability-only, but provide additional protections. This includes underinsured/uninsured motorists, medical payments, collision or roadside assistance. By adding on to your policy, you’re cherry-picking the types of protections you would like without necessarily paying the full coverage car insurance premium.
It does pay to shop for at least three to five full coverage policy quotes and discuss other options with insurers before determining what option is best for you.
Resources & Methodology
Sources
- Insurance Information Institute. “Facts and statistics: Auto insurance.” Accessed April 2024.
- Progressive. “When should you drop comprehensive and collision coverage?” Accessed April 2024.
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Laura Longero
Executive Editor
Laura Longero is an insurance expert and Executive Editor at CarInsurance.com, where she specializes in helping consumers navigate the complexities of the financial and insurance industries. She has 15 years of experience educating people about finance and car insurance. Prior to joining CarInsurance.com, she worked as a reporter and editor at the USA Today Network. Her expertise provides readers with practical guidance, helping them make informed choices about their financial and insurance needs.
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John is the editorial director for CarInsurance.com, Insurance.com and Insure.com. Before joining QuinStreet, John was a deputy editor at The Wall Street Journal and had been an editor and reporter at a number of other media outlets where he covered insurance, personal finance, and technology.
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Leslie Kasperowicz
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Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at CarInsurance.com.
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Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.