Difference Between Coverage and Liability Auto Insurance

There are many differences between coverage and liability car insurance. It is one of the main distinctions in auto insurance. Understanding the differences in coverage is of great importance if you are to have enough insurance.

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Car insurance is meant to protect you financially and make you whole after an accident or loss. Liability insurance will only offer you a fraction of the protection that you need. The main difference between liability and full coverage car insurance is in the level of protection it gives you.

Damages You Cause

If you cause an accident, then you are responsible for the damages you cause to yourself and the damages you cause to others. You are legally responsible—or liable—for paying for the injuries and damages you have caused to the other people involved in your crash.

Liability car insurance covers your legal responsibility concerning the injuries and damages you cause to others. Just about every state in the U.S. requires you to have at least a minimum amount of liability car insurance, and each state has a different set of minimum levels.

Some drivers buy only the bare minimum amounts of liability insurance required by their state’s laws; this is not a smart move, as it generally will not afford enough coverage to pay for those injuries and damages to others for which you are responsible. Your insurer will pay out to the limits that you purchase, and no more! This can leave you holding the bag for the remainder of the bills.

Each state mandates a minimum amount of coverage for injuries and repairs. The payment for injuries is divided into a limit for individuals and a limit for the entire accident. State minimums for liability coverage range as follows:

• $10,000 to $50,000 limits for individuals medical bills
• $20,000 to $100,000 limits for medical bills for the entire accident
• $5,000 to $55,000 limits for damages to vehicles and surrounding structures like utility poles and fences.

Some states have truly low minimum amounts of liability insurance that you must buy, and some states have significantly higher limits. However, both medical bills and car repairs can be very costly after an accident, especially serious accidents that might include multiple passengers and vehicles.

The experts at the Insurance Information Institute recommend that every driver have at least $100,000 in coverage for individuals and $300,000 in coverage for the entire accident.

Your Damages in a Crash

If you cause an accident, you also have your own vehicle damages to think of, in addition to those of the other driver. However, liability coverage will not pay for the repairs that your vehicle sustains in an accident with another vehicle or even a stationary object.

The full coverage option of collision will pay for damages to your vehicle. If your repairs cost more than your vehicle is worth, then collision will pay the fair market value of your vehicle. Both a settlement amount for repairs and one for the market value of your car will be reduced by the deductible amount that you choose.

A deductible is an amount that you are responsible for paying. It allows you to assume the responsibility for minor damages while your insurer pays for serious damages. Deductibles generally range from $250 to $2,000 and, the higher your deductible, the lower your costs for the coverage.

Destructive Weather and Nature

An accident isn’t the only event that can cause expensive damage to your vehicle. There are a host of events that can cause damage to your vehicle, and only full coverage will pay for those damages to be repaired.

Natural occurrences are one source of such damage. Storms can include high winds that can cause trees, limbs, and even power lines to fall on your car. Floods and fires are also further sources of damage that generally result in your vehicle being totaled. Just like with collision, your insurer will offer a fair market settlement if the repairs for damages from a comprehensive-covered peril amount to more than your vehicle is worth.

Another item that is covered by comprehensive is if you hit an animal, such as a deer. Some areas of the country also have problems with hitting elk or moose!

Damages from hitting an animal that weighs well 0ver 100 pounds can be serious, causing hundreds or even thousands of dollars in damages.

Liability coverage certainly won’t pay to repair those damages or to replace your vehicle, but comprehensive coverage will.

Some areas of the country are more prone to severe weather, making the full coverage option of comprehensive to be a necessity in order to protect the value of your car. However, such events can really occur anywhere, so it is a good idea for everyone to be prepared by purchasing the coverage.

Just as with collision, comprehensive also includes a deductible. Even though a high deductible is one way to save money on your premium, you need to make sure that you can pay your deductible if you have to file a claim.

When choosing whether you should purchase collision and comprehensive coverage, it is important to know how much your vehicle is worth. Insurers will reimburse you the fair market value of your vehicle, not the amount you paid for the vehicle; both amounts are minus your deductible, of course. All automobiles lose value, or depreciate, due to age, as the mileage increases and the condition becomes less than pristine.

Websites such as Kelley Blue Book and NADA.com will give you a ballpark figure for how much your vehicle is worth if you plan to sell it to another person. If the cost of the coverage plus your deductible amounts to more than your vehicle is worth, then you don’t need to purchase collision and comprehensive because it’s not cost-effective.

Theft and Vandalism

Another area that is covered by comprehensive insurance is auto theft. Some areas of the country have a very high theft rate, so this sort of loss is a major concern for many vehicle owners. However, vehicle theft can occur anywhere, from urban areas to the countryside.

Many drivers believe that their older-model vehicles are safe from theft because they are not flashy sports cars or impressive SUVs driven by the rich and famous.

However, some older vehicles are stolen mainly because their parts are so easy to sell, such as the 1994 Honda Accord and the 1991 Toyota Camry.

Both were on the Hot Wheels list of the 10 most stolen vehicles in 2011, furnished by the National Insurance Crime Bureau.

No matter if a vehicle theft is the result of a skillful car thief or some teenagers looking for the thrill of a joyride, chances are that a theft will cost you big time. Without comprehensive, the damages from a theft, or the complete replacement cost of your vehicle, will be your own. Similarly, damages from events like vandalism, riots, and war are also covered.

Collisions with an Uninsured Driver

Another thing that liability insurance does not cover is if you are hit by a driver who has no insurance or even too little insurance coverage. In most states you are well within your rights to sue the at-fault driver to recover your damages, yet your wait for compensation could take years.

The most recommended option is to have insurance to cover the damages if you are hit by a driver who has too little insurance. Though state laws require drivers to carry at least the minimum amounts of liability coverage, not everyone follows the letter of the law. Just like some people drive faster than the posted speed limit, some drivers have no car insurance.

Coverage options for dealing with a driver who has too little coverage or no coverage at all includes collision, uninsured and underinsured motorist coverage, and personal injury protection (PIP). Some states require drivers to buy insurance like uninsured and underinsured motorist coverage and PIP, though not all do.

It is a bigger problem than many would believe.

The national average of uninsured drivers is about 13%, or one in every seven drivers.

Some states have much higher uninsured driver rates; the Texas Department of Insurance puts the Lone Star state’s rate at 20%, or one out of every five drivers.

Most experts would agree that truly full coverage auto insurance would include options that protect you from an uninsured driver.

Cost is a Factor

Cost is obviously another big difference between liability coverage and full coverage; and it is generally the difference that most drivers focus on. Full coverage will always be more expensive than liability coverage because it offers more protection.

If you ever cause an accident or suffer some other loss, then liability insurance will actually cost you more in the long run. Liability coverage will not pay for your damages or your injuries; only full coverage will pay for such events.

It’s like buying a cheap car that is going to break down all the time and requires frequent, expensive trips to the repair shop. Or, you can spend a bit more up front on a nicer vehicle that doesn’t break down at all. The newer vehicle costs more at first, but in the long run it is more cost-effective.

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