Full auto insurance coverage is a term which can be used to describe a situation where the vehicle owner’s policy includes physical damage protection (collision and comprehensive) as well as the minimum liability insurance requirements mandated by the state where he or she lives.
In a situation where a vehicle owner took out a loan to pay for it, the financing company will probably insist that physical damage coverage be maintained until it has been paid off in full. The lender wants to make sure that its financial interests are protected if the vehicle is totaled in an accident. In that instance, the lender is entitled to receive the cash payout (up to the amount still owing on the car).
Collision Auto Insurance
Collision coverage pays for repairs to the car following an accident where it hit or was struck by a vehicle or another inanimate object. This type of coverage also pays for damages following a rollover accident.
The policyholder is required to pay a deductible before the insurance company will pay out anything to settle the claim. The amount varies, depending on the policy the owner has in place.
A person who wants to keep auto insurance costs down may want to consider buying a policy with a higher deductible. Insurance companies take on a lower level of risk when policyholders pay more toward the cost of settling a claim and can offer better pricing as a result.
Comprehensive Auto Insurance
Comprehensive auto insurance pays out when the damage caused to the policyholder’s vehicle was due to an event other than a collision. It covers the vehicle against the following types of losses:
- Falling objects
- Striking an animal
The policyholder must pay a deductible when making a claim under this coverage as well.
Liability Auto Insurance
Liability auto insurance coverage protects the policyholder from being personally responsible for paying for damages he or she causes in an at-fault accident. It has separate policy limits for bodily injury and property damage claims. In most states, owners must buy at least a minimum level of coverage but a consumer can also choose to buy a policy with a higher limit.
The bodily injury part of the policy pays for medical bills and rehabilitation expenses incurred by the occupants of the other vehicle involved in an accident. Claims for lost wages are made under this part of the policy. In some states, the bodily injury liability coverage compensates accident victims for their pain and suffering.
Property damage liability auto insurance coverage pays for the cost of repairs to the other vehicle involved in an accident. It also pays for repairs to public property, including fences, sheds, buildings, sign posts, mail boxes and light stands.
When to Drop Physical Damage Coverage
Keeping full coverage in place doesn’t make sense for all vehicle owners. Since the collision and comprehensive coverage pays out based on cash value, keeping it in place on an older model vehicle which has a cash value at or lower than the policy deductible is not the best choice.