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In a nutshell
Full coverage insurance typically refers to a car insurance policy that has liability coverage plus comprehensive and collision coverages. It should also include any other coverage required by the state or your lender.
What is full coverage car insurance?
As anyone who’s shopped for it knows, car insurance is full of legalistic, obscure, and sometimes misleading terms. A great example of the latter is “full coverage.”
Despite what you might understandably think when you hear “full coverage,” no car insurance policy can fully protect you in every situation. Yet, the term has gained wide use by insurers, car dealers, and lenders.
What does full coverage car insurance include?
Any car insurance policy includes one or more coverages, each of which is applicable in certain situations and with specific conditions. A typical full coverage policy thus consists of the following:
BI liability coverage
Required by law in nearly every U.S. state, Bodily Injury liability applies if you’re involved in an accident and are the at-fault driver. With this coverage, your insurance company will pay for medical and other bills related to any injuries suffered by the other driver, passengers, or pedestrians.
PD liability coverage
Property Damage liability is also required by law almost everywhere. It applies if you're involved in an accident and are the at-fault driver. With this coverage, your insurance company will pay to repair or replace any property you damage — including cars, contents, or other stationary property such as a mailbox or fence — belonging to others involved in the accident.
Your BI and PD liability both have limits. Limits refer to the maximum dollar amount the insurance company will pay for a claim. Any amount above the limit will be your responsibility — you could be sued by the other party to recoup that amount, so choose your limits carefully.
Collision coverage
If your policy has optional collision coverage, your insurance company will help pay to repair or replace your car if it’s damaged in an accident involving another vehicle or stationary object. Collision typically pays regardless of who’s at fault in the accident.
Comprehensive coverage
If your policy has optional comprehensive coverage, your insurance company will help pay to repair or replace your car if it’s stolen or damaged due to an event such as vandalism, fire, hail, flooding, or animal strike.
Collision and comprehensive coverages each have a deductible. This is an amount of money the insurance company will subtract from the cost to repair or replace your car. Think of it as your share of the costs. So if the cost to repair your car is $5,000 and you have a $500 deductible, the insurance company will pay $4,500 to the repair shop. You’ll be responsible for the final $500.
Some state laws require additional coverage. These often include personal injury protection (PIP), medical payments, uninsured motorist (UM), and underinsured motorist (UIM). Your insurance company or agent should be able to explain what coverages you do and don’t need on your policy to drive legally.
Additionally, if you finance a new car with a loan or lease, the lender may require collision and comprehensive coverage as well as gap insurance. Gap insurance comes into play if your car is declared a total loss (due to theft or damage beyond the ability to be repaired) and you owe more on your loan or lease than the car is worth. Gap ensures you’ll have enough money to pay back the lender to close the loan or lease.
What other optional car insurance coverages should you consider?
A full coverage policy, as described above, will pay for many common car insurance scenarios. But there are still gaps. Many insurance companies offer additional coverages that can expand your financial protection. These options will increase the cost of your insurance premium if you choose to add them to your policy.
- Accident forgiveness: Minimizes your premium increase if you’re involved in a fender-bender or other minor accident.
- Glass coverage: Pays to repair or replace a damaged windshield.
- Custom equipment coverage: Pays for damage to aftermarket accessories (such as exhaust kits, engine modifications, or custom paint) that might not be covered by your policy’s standard collision and comprehensive coverages.
- Umbrella insurance: Extends your liability limits beyond what’s available with the standard BI and PD liability coverages.
- Rental car reimbursement: Helps pay for the cost of a rental car if your insured car is not driveable due to an incident covered by your collision or comprehensive coverage.
- Roadside assistance: Many insurance companies offer roadside assistance services. These services typically include flat tire changes, battery jumps, towing and winching, lost keys, and fuel delivery.
What doesn't full coverage insurance pay for?
Practically every insurance policy has exclusions. These are incidents it simply won’t cover under any circumstances. Standard car insurance policy exclusions include the following:
- Damage caused by illegal activities such as street racing.
- Use of the vehicle for a rideshare service. (Many car insurance companies now offer separate rideshare coverage for this purpose.)
- Business use of the vehicle. (If you use your vehicle for business purposes, contact your insurance company or agent to see if they offer commercial auto insurance.)
- Damage resulting from war, terrorist acts, or other civil disturbances.
- Intentionally damaging the vehicle.
Check your policy contract to see what exclusions apply to your policy, and keep them in mind when you’re behind the wheel.
How much does full coverage car insurance cost?
According to the National Association of Insurance Commissioners, the national average annual premium for car insurance coverage in 2021 (its most recent year for data) breaks down as follows:
| Coverage | Cost |
|---|---|
Liability (BI and PD) | $632.38 |
Collision | $377.31 |
Comprehensive | $179.73 |
That’s a total premium of $1,203.65 per year.
Again, that’s an average. Your premium will be affected by a wide range of factors, such as your coverage choices (including limits and deductibles); year, make and model of your car; where you live; and your driving record.
As the saying goes, “you get what you pay for.” A policy with state minimum liability coverage will cost less than a policy with higher liability limits, collision and comprehensive, and additional options such as gap insurance. But the latter policy will provide you with more financial protection.
That’s a total premium of $1,189.42 per year.
Again, that’s an average. Your premium will be affected by a wide range of factors, such as your coverage choices (including limits and deductibles); year, make, and model of your car; where you live; and your driving record.
As the saying goes, “you get what you pay for.” A policy with state minimum liability coverage will cost less than a policy with higher liability limits, collision and comprehensive, and additional options such as gap insurance. But the latter policy will provide you with more financial protection.
Who needs a full coverage policy?
If you’ve financed your car with a loan or lease, having full coverage (including gap insurance) may be a requirement from your lender.
Beyond that scenario, you should strongly consider full coverage if the cost to repair or replace your car would stretch your finances. Keep in mind that many modern cars are loaded with sensors and other electronics that cost a lot to repair or replace. A seemingly simple headlight replacement or dinged bumper could set you back thousands of dollars.
Full coverage should protect you in most situations
The term “full coverage” may be a bit misleading, but a policy with liability, collision, and comprehensive coverages should protect you financially in most situations. Talk to your agent or insurance company to sort through your coverage options and get a policy that’s right for you.
Frequently asked questions (FAQs)
How do I know if I have full coverage?
Full coverage means your car insurance policy includes bodily injury and property damage liability, plus collision and comprehensive coverages. It should also include any other coverages required by state law or your lender.
Your policy’s declarations page — which you should receive from your insurance company when you buy, change, or renew your policy — lists your coverages.
What’s the difference between full coverage and liability?
Your liability coverage protects you financially if you’re at fault in a car accident. It ensures the other involved drivers are reimbursed for any medical bills or repair costs.
Full coverage means that in addition to liability, your policy also includes collision and comprehensive coverages. These coverages help pay for repairing or replacing your vehicle if it’s damaged in an accident, stolen and not recovered, or damaged by an event such as severe weather or an animal strike.
What does it mean to have full coverage car insurance?
Full coverage usually refers to a car insurance policy that includes bodily injury and property damage liability coverages, comprehensive and collision coverages, and any other coverage required by the law in your state (such as uninsured motorist or personal injury protection) or your lender.
Beyond that, a full coverage policy may include optional coverages such as gap insurance or rental car reimbursement. These options can be added to suit your personal needs.
Do I need gap insurance if I have full coverage?
If you finance your car with a loan or lease, the lender may require gap insurance in addition to full coverage. Gap is otherwise an optional coverage, but it's one you might want to consider if you owe more to the lender than the car is worth.
AP Buyline’s content is created independently of The Associated Press newsroom. Our evaluations and opinions are not influenced by our advertising relationships, but we might earn commissions from our partners’ links in this content. Learn more about our policies and terms here.