Why You Might Not Need Full Coverage Car Insurance

A photo to accompany a story about full coverage insurance Adobe Stock

NextAdvisor is not a licensed insurance company, agency or broker and we do not sell, solicit or negotiate insurance. Our content provides summaries of insurance providers and/or products that may not include all terms, benefits or limitations of such provider or product. Please consult a licensed insurer or producer regarding any insurance product. Our site may include links that take you to another website and result in us earning a fee. However, our compensation is never tied to whether you purchase an insurance product. For more information, please see our Advertising Disclosure and How We Make Money.

Full coverage car insurance is a combination of coverages that help protect you and your vehicle in the event of an incident. But it can mean different things to different people in different states — and to their car insurance companies.

That’s why the first thing to do is define what full coverage actually means for you.

“Auto insurance is a package of benefits. There’s a variety of benefits that you get; some are required in states and some are not required,” says Laura Adams, an insurance expert and host of the “Money Girl” podcast. “Typically, auto insurance companies help you understand how much coverage you need.”

Here’s what you need to know about full coverage car insurance.

Full Coverage Car Insurance at a Glance

There’s no set definition of full coverage car insurance; you can tailor it to be what you want it to be — with a few caveats. Most states require drivers to have some form of liability insurance, which covers property damage or bodily injuries you cause others. However, state minimums for liability insurance are usually not enough to protect you if you get into a serious accident, which is why many insurers offer other types of coverages on top of liability insurance. 

Many other types of coverage, like gap insurance or comprehensive and collision insurance, are optional and can be added onto your policy, depending on the insurer and your situation. 

“If that repair or replacement would be financially difficult for you, that’s the reason you have insurance — to protect you from that risk,” says Adams. 

It’s common for people to have liability, comprehensive, and collision insurance, particularly if they have a new or expensive car, Adams says. But it’s ultimately up to you to pick the amount of coverage that fits your budget, while still meeting state requirements and adequately protecting you and your car. The following categories of insurance could make up full coverage car insurance:

  • Liability insurance (bodily injury and property damage): The bare minimum coverage you need to drive in most states. This type of coverage pays for the property damage and injuries of others if the accident is your fault — up to your covered limit.
  • Collision insurance: Coverage that protects your car if it’s damaged in an accident with another car or object.
  • Comprehensive insurance: Coverage that protects your car if it’s damaged not as the result of a collision, like theft, vandalism, and animal-related damage. 
  • Medical payments coverage/personal injury protection: This type of coverage pays medical expenses for you and your passengers, regardless of who caused the accident. It’s mandatory to carry in some states, like Michigan and Kentucky, but optional in others.
  • Uninsured and underinsured motorist coverage: This type of coverage protects you if you get into an accident through no fault of your own with someone who doesn’t have liability insurance. 
  • Rental reimbursement coverage: If your car is being repaired after you file a claim, this type of coverage pays for transportation costs, such as a rental car or public transportation.
  • Gap insurance: Coverage that makes up the difference between what your vehicle is currently worth and the amount you actually owe on it.

How Much Does Full Coverage Cost?

Adding certain coverages can significantly increase the total cost of your car insurance bill. Sometimes, it’s necessary. Sometimes, it’s not. It’s important to know the difference, so you’re not overpaying every year. Auto insurance now costs an average of $1,202 a year in the U.S., according to AAA data, but that number can vary greatly on an individual basis. Here’s how much full coverage costs on average at the five largest insurance companies:

Average Cost of Full Coverage by Insurance Company

CompanyFull coverage
State Farm$1,422
GEICO$1,325
Progressive$1,419
Allstate$1,920
USAA$1,252
Source: Average annual premium rates are from Bankrate’s latest data. Full coverage in this chart is defined as liability, comprehensive, and collision insurance. (Bankrate shares an owner with NextAdvisor.) 

Who Needs Full Coverage Car Insurance?

Buying full coverage car insurance doesn’t make sense for everyone. Before making a decision on how much coverage you should buy for your car, you should ask yourself, “What is the risk of me having this potential accident? Could I afford it? Do I have enough money to quickly make that repair?” Adams says.

Full coverage car insurance may make sense for you if:

  • You have a new or expensive car.
  • You have a lease or loan on your car. Most lenders require liability, collision, and comprehensive coverage to protect their investment. 
  • You live in a populated area where you’re more at risk of getting into an accident.
  • You live in a place with severe weather, high car theft rates, or high risk of animal collisions.
  • You can’t afford to repair or replace your car if it’s severely damaged, totaled, or stolen.

But full coverage may not be worth the cost if you have an older car. There are a few reasons: comprehensive and collision insurance only pays you up to the actual cash value of your car at the time it’s damaged or stolen, and there’s usually an insurance deductible you’re expected to pay out of pocket toward the car’s repairs or replacement. 

Let’s say it costs you $700 per year for comprehensive and collision and you have a $1,000 deductible, but your car is only worth $3,000. Your insurance company would only reimburse you $2,000 at most — only a few hundred dollars more than you paid for the coverage. That’s why it’s important to check your car’s value every year when you’re auditing your car insurance bill and trying to figure out how much coverage makes sense for your budget.

“A lot of people might drop comprehensive and collision when the value of the car is really low, and they feel it’s just not worth paying the insurance premium anymore,” says Adams. “You have to make that judgement on your own on whether you could afford to replace it.”

If you’re on the fence about how much coverage you need, ask an independent car insurance agent for advice and compare prices across coverage options while shopping for car insurance.

How to Sign Up For Full Coverage Auto Insurance

If you decide it makes sense to carry both comprehensive and collision coverage, you can easily add them to your auto insurance policy by logging into your online account or calling your insurer. 

You may need to provide additional information to your insurer about your car, such as the make, model, vehicle identification number, safety features, current odometer reading and annual mileage driven.

Keep in mind adding collision and comprehensive insurance will make your policy more expensive than if you only had your state’s mandatory liability coverage. Still, it’ll be worth the investment as long as full coverage car insurance makes sense for your situation.