Full Coverage vs Liability Only

This is a question that I get asked all the time, which makes it a good topic to discuss when considering
your auto insurance options. As a general of thumb, when your vehicle is “10 years old” you can start
thinking about carrying liability only on your vehicle. When I say, liability only I am referring to not
carrying comprehensive and collision coverage. The easiest way to explain the difference is to look at
what each coverage provides. Liability will cover the “other person” if you are at fault in an accident.
This includes all of their medical expenses, pain and suffering, lost wages, and even legal costs related
to an accident. This makes it very important to carry higher limits on your auto insurance to protect
yourself and your biggest assets. Full coverage means coverage for “your vehicle”. There are two parts
to full coverage: comprehensive and collision coverage. Comprehensive coverage will cover “acts of
God” such as weather claims, hitting a deer or animal, theft, fire, etc. Collision coverage will provide
coverage for any impact or collision with another vehicle or object. I usually explain to clients that
a collision loss is usually “your fault”. For example: If you were to rear end someone or back into
something and there is damage to your vehicle. These are examples of a collision loss.

In the event of an accident or a loss, you will also have a deductible for both comprehensive and
collision. The higher your deductible, the lower the premium. The standard or most common
deductible options are $250 or $500. I would only recommend $1,000 or higher if you have this in
savings, or can come up with the money in the event of an accident or claim.

If you say that you just want liability coverage, you still have to remember that there are many
other coverages that you should continue to carry on your policy. These coverages include: medical
payments, uninsured & underinsured motorists, towing/labor, and uninsured property damage.

Another idea to consider, which we share with all of our clients is to consider the value of the vehicle.
I would recommend looking at NADA and Kelly blue book websites for the value of your vehicle. Most
insurance companies use one or a combination of these websites when totaling out a vehicle. If you
have a 1995 Model vehicle and are carrying full coverage, it doesn’t make sense if the vehicle is only
worth $1,000 or less. If you have a $500 deductible you would only net $500 dollars if the vehicle was
totaled out. The cost of full coverage insurance would not warrant the extra premium that you have
paid in over the years.