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Liability vs. Full Coverage Insurance

Choosing car insurance can be an overwhelming and confusing task if you are not familiar with some basic terms and options. This article will explain the difference between the two major insurance types – Liability and Full Coverage.

What Liability Insurance Includes

Liability Insurance is, by definition, a policy that covers the damage you have caused to others (excluding passengers in your car) as well as their property. Minimum requirements are imposed by the state and defined as a three-part ratio. Minimum Liability coverage in Wyoming, for instance, is 25/50/20, which means that if you are involved in a car accident and are found at-fault, you will have to pay $25,000 for person for bodily injury – but not more than $50,000 – and another $20,000 for their vehicle’s damage.

These are, however, only the minimum requirements. Keeping the above example, if the bodily damage you cause to another driver amounts for $100,000 then the insurer will pay $25,000 and you will have to provide the difference of $75,000. Therefore, it may be wise to carry insurance in excess of the state minimums.

What Full Coverage Insurance Includes

The Full Coverage insurance includes the Liability coverage plus two other packages on top of it – Comprehensive and Collision. As a driver, you can choose Comprehensive coverage without Collision, but you may not choose Collision without the Comprehensive package.

Comprehensive insurance covers your vehicle from all damage other than collision. This includes, but is not limited to vandalism, theft, fire or natural disasters. Oddly enough, accidents involving animals are included here rather than in the Collision coverage.

Collision insurance protects you in case you are hit by another vehicle, whether or not it was your fault. In no-fault states, compensation for property damage is still based on fault, so you had your car damaged due to the other party’s fault you may resort to either a lawsuit against the bad driver or your own insurance policy.

Full Coverage or Liability Insurance?

If you are purchasing a new vehicle, your finance company will definitely ask you to get a Full Coverage insurance – you can’t go without it. But once if you have finished paying for your car you may consider switching to the minimum Liability coverage to minimize expenses. Keep in mind, however, that no matter how safe a driver you are, accidents can happen, and the more expensive your car is, the more you will have to pay for a minor scratch or a broken tail light. There are many instances where damages in a minor crash where you were at fault can cost more than a year’s Full Coverage premium.

Moreover, if you have a teenager driving your car then a Full Coverage is quite a must. Youngsters are known to be three to five times more prone to getting involved in accidents than grown-ups, and the same goes for people older than 75 years.

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