Liability vs. Full Coverage: What’s the Difference, Cost and Which Is Right for You?

Understanding the potential drawbacks and benefits of maintaining liability vs. full coverage car insurance can help you determine your best option. While premiums for liability-only policies tend to be cheaper, coverage is limited. Full coverage insurance typically includes comprehensive and collision coverage, providing protection for a wider range of situations, including damages to the policyholder’s vehicle.

MoneyGeek analyzed various policy options based on circumstances, needs and preferences.

• What Is the Difference Between Liability and Full Coverage?
• Cost Comparison: How Much Does Full Coverage Cost vs. Liability-Only?
• Should I Get Full Coverage or Liability?
• Choosing Which Is Right for You
• FAQs About Liability vs. Full Coverage

Liability coverage protects you against the cost of damages incurred by the other driver in an accident. It includes medical treatments and repairs to their property. Simply put, it only pays for damages to the other driver and not your own. A full coverage policy contains liability insurance and comprehensive and collision coverage, which help pay for damages to your car, not limited to collisions, like theft or vandalism.

Because of the increased coverage, full coverage costs more than liability-only. All states have liability coverage as part of their minimum insurance requirements, while a full coverage policy is not required in any state.

If you cause an accident and the other driver sustains injuries or property damage, liability coverage can help you pay for the expenses. However, if you, your passengers or your car sustain any damage, a liability-only policy won’t provide you with coverage. You can purchase liability insurance as a separate policy or include it as part of full coverage.

A liability-only policy contains two types of insurance: bodily injury and property damage.

All states have car insurance laws requiring car insurance to operate a motor vehicle, and some require you to carry proof of insurance with you when driving. This regulation started in 1927 when Massachusetts became the first state to require drivers to buy liability insurance.

Each state has its own minimum car insurance requirements. Purchasing a policy meeting these minimum limits allows you to drive legally, but there are advantages to paying for increased coverages.

Having increased limits may cost more, but it also provides additional protection when you’re on the road. However, it doesn’t automatically mean you should purchase full coverage car insurance. You can also opt for add-on coverages, such as uninsured/underinsured motorist coverage or personal injury protection insurance.

Full coverage car insurance provides financial protection for your vehicle and injuries, not just the other drivers. Comprehensive and collision insurance, both included in a full coverage policy, help you pay for damages from collision and non-collision-related incidents.

While liability insurance is the minimum requirement in most states, opting for "full coverage" adds collision and comprehensive protection. This means your insurer will help cover the cost of repairs or replacement for your vehicle in a wider range of situations, such as accidents, theft, vandalism, and even some instances where car insurance covers tire damage caused by events like potholes or falling objects.

Common add-on insurance options include PIP, Guaranteed Asset Protection (GAP), roadside assistance and uninsured/underinsured motorist coverages.

The difference in price between liability and full coverage car insurance can be significant. For instance, State Farm offers the most affordable option for both liability and full coverage insurance based on average rates. A liability-only insurance from the company costs an average of $409 per year. In contrast, the average cost of a full coverage policy from the same carrier is $883 annually.

MoneyGeek compared quotes from several car insurance providers and found that State Farm has the lowest rate for both types of policies. However, the costs between its liability-only and full coverage differ by $474 annually. That means a full coverage policy may include other insurance options, but it’s typically more expensive. Other providers may offer discounts that could lower the cost of full coverage.

The cost of auto insurance may vary greatly depending on where you live. Car insurance providers tend to calculate policy rates differently between states. The most affordable option at a national level isn’t necessarily the cheapest choice in your state.

Select your age range and preferred coverage below to see which company offers the cheapest minimum and full coverage policy in your area.

Each carrier has its own list of factors impacting car insurance costs, so it’s best to check with the company or an agent.

You should also consider the type of car you drive, your location and your budget when deciding between liability vs full coverage car insurance. Liability insurance may be the right option if you have a low-value car, have a lot of mileage or have enough money to replace your car. However, upgrading to full coverage may be a good idea if you have a high-value vehicle, are on a car lease or loan, regularly drive or live in an area with severe weather conditions or a high car theft rate.

A liability insurance policy may be enough for you if your car is old or has a low value. It’s also the better option for drivers with high-mileage vehicles. Additionally, full coverage tends to cost more. So, if a higher premium doesn’t fit your budget, it may be better to choose liability coverage. Keep in mind that you may end up owing more out-of-pocket after an incident.

One of the best factors to determine whether or not it’s worth it to keep paying for full coverage car insurance is your vehicle’s age. As with most things, a car is subject to wear and tear. At some point in your car’s lifespan, purchasing a new car becomes more cost-effective than paying for full coverage car insurance year after year.

A car typically begins to depreciate as soon as it leaves the lot. And a car that has aged 10 years will have considerably depreciated, making the corresponding annual cost of full coverage insurance less worthwhile.

Not all vehicles follow the 10-year rule. Some makes and models age better than others and may retain more value. The 10-year rule still makes for a good rule of thumb, though, when you’re figuring out whether you should continue paying for comprehensive and collision insurance.

There are various factors to consider when deciding what type of insurance to purchase. Your car’s age, its mileage and even your financial standing come into play. Your circumstances determine most variables, so it pays to take a bit of time and effort to evaluate your situation.

It would also help to review your financial situation to determine whether to purchase liability-only or full coverage. If you don’t think you can survive a financial hit after an accident, it may be better to get full coverage insurance.

The best full coverage car insurance policies may cost more than liability insurance but provide wider protection. It makes the most sense if you have a high-value car, if you are financing your vehicle through a lease or loan, if you use it regularly or live in an area with severe weather conditions or a high car theft rate.

Although most drivers know how crucial it is to carry a car insurance policy, there can still be confusion surrounding the differences between liability and full coverage. Learning the answers to some frequently asked questions can help you make an informed decision for your policy.