The phrase “full coverage” is something 99% of consumers misunderstand. Full coverage means you have liability insurance, uninsured motorist coverage, comprehensive, and collision coverage.
- Comprehensive covers damage to your vehicle from unexpected non-collision incidents like theft, animal damage, falling trees, and weather damage.
- Collision covers damage to your vehicle that’s the result of a collision with another vehicle or object.
Extra coverages that most people add are towing, roadside, rental car, and personal injury protection. So, “liability only” insurance would mean you have no comprehensive or collision coverage, which is legal. The law just wants to make sure you can cover damages to others. However, if there is a loan on the vehicle, you must have full coverage, which means: liability, comprehensive, and collision.
When determining coverage for my own personal vehicles I first look at the value of my car. For example, my 2015 Mercedes (midlife crisis) has 133,000 miles and is now worth under $10,000. Once it gets to being valued at around $5000, I will use the maximum amount allowed for comprehensive coverage, but with a 0 deductible for windshield.
Comp claims under $1000 will not increase your premium much at all UNLESS you have 3 or 4 a year. I will drop the collision coverage when my car loses more value, because it won’t be worth filing a collision claim that will likely cost me more than $5000 over a 5-year period (in premium increases).
Collisions are at-fault accidents and raise the premium by about 55% over a 5-year period. I currently have $2000 deductibles because if I know it is going to increase my premium for 5 years, I won’t file a claim (I can easily pay out-of-pocket) . However, everyone must determine what they consider valuable, and how much they can come up with to repair damages. Higher deductibles do lower premiums, but the difference isn’t always huge…so ask your agent to give you options.
I will always keep high levels of liability insurance to protect others and to makes sure I am not underinsured. If you cause and accident and are underinsured, you will either have to come up with the money or face a lawsuit. Speaking of which, we also want to remember that our auto insurance isn’t being purchased just to protect us or other drivers, but equally imporant…it is being purchased to protect everyone who is a passenger in our vehicle. The phrase “My friends would never sue me” is one that has been disproved many times.
Full disclosure, this is my current auto coverage with Safeco, and the premium is for 12-months (which includes a 22 year-old male driver):
Side note, I could get a much lower premium by dropping the accident forgiveness, but I am willing to pay more just in case I mess up! I pay $3000 a year for me, my son, and his vehicle which is a Dodge Charger. One at-fault would cost me an additional $8,250 over a 5 year term, so I will pay the extra few hundred a year.
Hope this helps you better understand insurance coverage. Please feel free to email me at tony@tonyrussellinsurance.com.
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