What is Full Coverage?
This is not required by the State. This type of auto insurance covers your vehicle in case you have an accident, unlike basic liability, which covers only the other driver’s vehicle. Full coverage also includes the state-mandated minimum liability coverage.
What is important to know is that full coverage includes the comprehensive or “collision” package. Collision protects your vehicle if it is damaged in an accident. Comprehensive provides protection if your vehicle is damaged by something other than a collision, such as your car being stolen or a light pole falling on your car when it’s parked at night.
How Does Full Coverage Work?
To understand how full coverage works, you should know what “deductible” means. When you purchase an auto insurance policy, you and your agent determine the deductible. This is the amount that you must pay out-of-pocket (not covered by your policy) in the event of an accident. Typically, a higher deductible means a lower rate (or cost per month) for your insurance policy, so if you’re looking for comprehensive coverage but want a lower price, you can increase your deductible.
What happens if you have an accident? If your deductible is $1,000 and your cost for damages is $3,000, you pay $1,000 out-of-pocket and the insurance company pays the remaining $2,000. If another driver causes an accident involving your vehicle, the full coverage (minus your deductible) pays the damages until the other driver’s insurance company pays on the claim.
Note that your insurance policy covers only repairs to bring your vehicle back to the actual cash value it had before your accident. Actual cash value is the price of your car minus depreciation (the decrease in value due to wear and tear) and your deductible. Full coverage pays an amount up to the actual cash value of your car to either repair it or replace it (if it is a total loss). For example, if your car is worth $5,000 at the time of the accident, you are covered up to $5,000. If the damage exceeds $5,000, the insurance company declares the car a total loss and pays you $5,000 to help you replace it.
These descriptions are meant to assist you in determining your auto insurance needs. These are not complete descriptions and do not constitute an insurance contract or coverage for specific losses. For a complete description, please consult your policy contract or contact your insurance agent.