Vehicle Insurance - Full Coverage Vs. Liability

The age old question that plagues many insurance buyers is whether to purchase full coverage or liability only for your vehicle. For some background information, liability insurance is a type of insurance that only covers the damage that occurs to the third party; it does not cover your vehicle. Full coverage insurance will cover third party damages plus comprehensive and optionally collision coverage. Liability coverage is mandatory when driving a vehicle, full coverage is optional.

Full coverage insurance covers third party damages and your own. You can elect to pay for comprehensive only or collision and comprehensive coverage. Comprehensive is sometimes referred to as "OTC" or Other than collision. This includes anything from fire damage, theft, weather, vandalism etc. Collision is the coverage that is applied to any damage caused to your vehicle from the accident. You cannot have collision coverage without comprehensive coverage first. It is important to know what coverage you have in case of an accident. Full coverage is optional in the United States, although if you're leasing a new vehicle it is mandatory. Full coverage obviously costs more to purchase than just liability. With full coverage, the insurance companies not only have to cover the costs of the third party, but also your vehicle as well, even if the accident was your fault.

Minimal liability laws vary from state to state and country to country. For example, in Colorado the legal minimums to drive a vehicle are 25/50/15. 25 refers to the maximum amount of money (in thousands) that your insurance company will compensate for injuries to a single person of the third party per accident. 50 in this case would mean your insurance provider would pay a maximum of $50,000 for all injuries in a single accident. The last number means that your insurance company will pay up to $15,000 towards property damage per accident. It is important to have enough coverage so that if you get in an accident, your insurance provider will pay for all expenses.

While liability is the cheapest form of insurance, it can be dangerous to think that since you have it, you're covered in all accidents. This couldn't be further from the truth. In fact, if you were in an accident that caused $50,000 bodily injury to the third party, but your insurance will only pay $25,000, the third party can come after you and file a lawsuit. Obviously, it is important to have enough insurance coverage so that you are covered in most situations, but not too much so as you are paying for un-needed coverage. It is important to remember that if the accident is not your fault, you will most likely receive compensation from the other person's insurance company for damages caused to you or your property. Say you were rear-ended, the other person's insurance company would pay for the damage caused to you.

It is important to shop around for the best rates and compare different policies from different companies to find out which one suits you best. The right insurance policy is important for peace of mind and financial peace. As a general rule, the older the driver, the less expensive the insurance is. Vehicles with less performance will also have lower costs to insure. If you drive a brand new Lexus, it is probably a good idea to have full coverage insurance on it as the repair bills would far our weigh the insurance costs. Just remember: all vehicles must have minimal liability to be driven legally; more coverage is optional.