Full coverage car insurance distinguished from standard

In all but three of the US states, you will commit a criminal offense if you drive on a public road without a valid liability policy in force. Other than that, the amount of insurance you carry is for you to decide. If you have no significant assets and have not borrowed money to buy your vehicle, basic liability will probably be enough for you. But if you have assets and you have borrowed money to buy the vehicle, you will have to buy full coverage.

Most lenders make it a condition of a car loan that you take out both collision and comprehensive coverage. The reason is the wider the coverage, the greater the protection for the lender. Unfortunately most vehicles depreciate fast and, if you are unlucky and total the vehicle, the insurer will only pay out the fair market value of the vehicle. In most cases, this will pay off the loan but, if you have bought a new vehicle, you should consider buying gap coverage to bridge between the fair market value and the amount owing to the lender.

Obviously, only a fraudster decides to have an accident. Everyone else drives around hoping for the best. While this is a reasonable attitude for the metal and plastic in the vehicle, it does not work so well for the people. The cost of medical treatment has been rising faster than inflation for years. If people are more seriously injured, the total bill can be more than most standard policies cover. As part of full coverage you should therefore cover you personal injury costs and provide against high claims from everyone else. A really pessimistic driver would consider an umbrella policy to cover against the really high claims, e.g. you have the misfortune to hit a top banker driving a Bugatti Veyron and, during the time he is unable to work, he loses his bonus. That is a claim worth millions!

Coming back down to Earth, there are other elements to consider adding into the full coverage car insurance package. This includes breakdown provision from towing to a replacement vehicle while your’s is in the body shop. Quite how "full" you make your coverage depends on a balance between real risks and what you can afford. If money is no object, you can write in terms to cover against even remote risks. If you are on a budget, look very carefully at the small print to ensure you buy only what you need.