If you’ve ever financed a car, the lender may have told you you needed full coverage auto insurance. Most people are familiar with the term, but not everyone knows what it means. So what is a full coverage car insurance policy? Here’s the MoneyLion guide.
Understanding full coverage car insurance
Full coverage car insurance is a group of different coverage types — it’s not a policy itself. It gets its name because it protects against most kinds of damage.
If you’ve just financed a car, there’s a good chance your lender requires you to have full coverage insurance. But even if your car is paid off, you might want the extra peace of mind that only being fully covered can bring.
What are the components of full coverage car insurance?
Full coverage car insurance is usually a combination of three car insurance policy types.
Collision coverage
If you only have liability coverage and you cause an accident, your car’s repair costs are on you. Collision coverage pays to fix your car even if you’re at fault, though, as you might guess, it’s more expensive than liability and comprehensive coverage.
Comprehensive coverage
Comprehensive coverage pays for repairs or replacements if your car is damaged outside of a collision with another car or object. For instance, it usually covers weather damage, vandalism, theft, damage from falling objects, or damage from hitting an animal.
Comprehensive coverage can help you avoid expensive repair bills in the event of unexpected damage. However, it may add a significant amount to your monthly premium.
Liability coverage
Almost every state requires you to have liability coverage. This protects you if you’re at fault in an accident. It typically covers the costs and expenses of anyone you injure.
Liability coverage can protect you from financial ruin if you cause a serious accident. If you’re caught driving without it and you live in a state where it’s required, you may face criminal charges.
Is full coverage car insurance mandatory?
Most states require you to have liability insurance but not comprehensive or collision. However, full coverage is mandatory for some lenders. If you are financing a car, your lender might require you to have full coverage insurance until the loan is paid off.
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Do you need full coverage car insurance?
Even if you aren’t required to have full coverage insurance, you might decide to get it. Here are some things to consider.
Age and condition of the vehicle
If your car is brand-new or close to it, it might be worth protecting your investment with a full coverage policy.
Driving history
If you’ve caused accidents in the past or have a history of reckless driving, full coverage insurance might be a good idea.
Geographical location
If you live in an area prone to hail, tornadoes, or other events that might damage your car, full coverage or at least comprehensive coverage is a good idea.
Your risk tolerance
If you’re someone who is generally risk-averse, you might find that you enjoy better peace of mind when you have full coverage.
Financial affordability
Full coverage can be expensive. Take a look at your finances to see if you can comfortably afford to pay it.
How much does full coverage car insurance cost?
What is a full coverage car insurance policy’s cost? It varies based on a few different factors.
Vehicle make and model
Newer, more expensive cars cost more to repair and replace, so they’ll be more expensive to insure.
Age and driving experience
Usually, younger and less experienced drivers pay higher premiums, as they pose a greater risk to the insurance company.
Driving record
If you have a history of reckless driving, DUIs, or speeding tickets, your premiums will be higher because the insurance company sees you as a risk. However, many insurance companies only look back three to five years.
Location
Insurance companies consider some locations to be high-risk. If you live in an area with higher crime rates or a higher rate of accidents, your premiums might be higher.
Credit score
Some insurance companies factor in your credit score when deciding your rate. Higher scores generally mean lower premiums.
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Annual mileage
If you spend a lot of time on the road, you’ll likely have higher premiums than drivers who don’t.
Coverage limits and deductibles
Low-deductible policies tend to be more expensive than those with high deductibles. Likewise, higher coverage limits will make your policy more expensive.
Insurance Score
Insurance companies may calculate an insurance score that predicts how likely you are to file claims. This is somewhat similar to your credit score, but insurance companies don’t reveal exactly how they calculate it.
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How to find the best full coverage car insurance policy
What is a full coverage car insurance policy? The answer varies by insurance provider. Here’s what to do before you pick yours.
Review different insurance companies and their offerings
Go beyond just getting quotes. Make sure you understand what is and isn’t covered under each company’s policy.
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Understand coverage options and policy details
Reading the fine print is critical when choosing a policy. You’ll also want to understand the different coverage types each provider offers.
Seek professional advice and assistance when needed
Insurance can be hard to understand if you aren’t an expert. If you can, reach out to an insurance agent or similar professional for guidance. Independent insurance agents don’t work for a specific company, so they may be more likely to give you unbiased advice.
Is Full Coverage Insurance Right for You?
Full coverage insurance can keep you and your car protected against the unexpected. But it may not be right for everyone — you need to weigh the potential benefits against the cost of your premiums.
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FAQ
Can I purchase full coverage insurance for a leased car?
Yes — most leasing companies require you to have full coverage.
Can I switch from liability insurance to full coverage insurance at any time?
Yes, you can. All you need to do is get in touch with your insurance agent.
Does full coverage insurance cover all types of damages?
In many cases, it covers nearly all types of damages. But keep in mind that no insurance offers a 100% coverage fee for every type of damage.
