Sunday, September 28, 2008

Liability Only Vs Full Coverage: Choosing Auto Insurance Coverage

What are the differences between these two extremes? These are the types of coverage that all other auto insurance plans are based off since they are either some form of liability-based plan or full coverage-based plan. Standing on opposite ends of coverage spectrum are liability only and full coverage. There are plenty of companies out there offering competitive rates and a host of different coverage packages.

For a first-time car owner, one of the difficult things to sort sometimes is the kind of auto insurance coverage you want.

This includes property damage as well. Briefly defined, liability coverage is the level or component of insurance coverage that deals with any damages or injuries where you as a driver were at fault. Of course, the question is this: What is liability insurance? In order to drive legally in every state in the country, you need some form of liability insurance coverage.

These regulations include what the minimum amount of legal coverage required. All car insurance is actually controlled by the individual states with each of the states have their own provisions and guidelines.

Every state abbreviates its minimum liability amounts using three numbers separated by forward slashes. For example, let 's say that you have "25/50/15." Each number represents different component of the liability coverage. The first one stands for the maximum amount that the insurance company will pay for bodily injuries sustained by a single person, per accident. The second number refers to the maximum dollar amount at the company will pay for all injuries in a single accident. Finally, the third number refers to the total amount that the company will pay for property damage, per accident. These numbers are usually in the thousands of dollars so the amounts would be $25,000; $50,000; and $15,000 and are representative of minimum amounts. More coverage per amount may be added at any time.

Full coverage insurance is considered to be a misleading term by many insurance customers since it does not literally cover "everything." If this is not true then what is full coverage auto insurance. Well, in reality, full coverage involves the addition of two other forms of insurance coverage to a foundation of liability coverage. These two types are called comprehensive and collision coverage. Now there can be some flexibility when it comes to this type of insurance coverage since you do not necessary have to add both of these coverage types to liability. Comprehensive can stand on its own without collision but collision cannot do the same without comprehensive.

Collision is mandatory along with comprehensive when you are still paying on a car loan. Collision coverage deals exclusively auto collisions. Comprehensive coverage deals with other areas of damage like that from theft, vandalism, fire, hail, etc.

But, at least you have a better idea of what the car insurance landscape looks like. The costs will vary, as will the customized features that individual companies include in their various plans. Depending on factors like whether your vehicle is new, used, or still under financing will determine whether you choose one or the other. You can see the difference clearly between having liability only coverage and have full coverage options.


David September 29, 2008 at 6:19 AM  

Thank you for the post "Choosing Auto Insurance Coverage"... It is quite informative... According to me it is necessary for all car drivers to know about this...

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