A commonly used term when discussing auto insurance is “full coverage.” But what exactly is full coverage? Don’t assume it means that a policy will cover everything. Unfortunately, that is not the case. When purchasing an auto insurance policy your agent should fully explain the difference between a “full coverage” policy and a “liability only” policy. Once that clarification has been made, it up to the client to choose the type policy best for him or her.
All personal auto insurance policies are broken into two essential parts: the liability portion and the comprehensive portion. Liability is required by law in most cases. It is the portion of the policy that will pay out to the other driver in an accident caused by you. The second portion is the comprehensive (“comp” for short) and collision coverage. Comp and collision are optional coverage in the case you own your car outright. Otherwise, the holder of your car loan, whether it’s a bank or credit union, will require comp coverage to the extent you owe on the car. Comp and collision are designed to cover your vehicle after an accident or alternate damage like a vandal keying your ride.
The term “full coverage” simply means you’ve got both liability and comp coverage in your auto policy. When opting for full coverage, the policy holder will select between options for the deductible--$250, $500 and $1,000 are standard deductible levels. The higher the deductible, the lower the cost of the insurance. The insured is obligated to pay the deductible first before any coverage kicks in on an auto claim.
Full coverage does cost more than a liability-only policy, but it’s reassuring to know you won’t be out $1,000 in case of an accident. (Even a headlight replacement on newer cars will likely exceed $1,000.) The sense of security when you have a full coverage policy is a benefit drivers who have been there appreciate. Any accident is a hassle. It’s never convenient to have to replace your ride with another, not to mention the time consumed by filling out paperwork or even visits to a physical therapist for a tap to your bumper that you wouldn’t have thought could make your neck ache like it does. Full coverage can also spare you from the costs of car-related accidents that can cost upwards of $100,000, as in the case of a client who forgot the gas pump was yet in her car when she attempted to drive away after filling up. Damage to the gas station island exceeded $70k and full coverage would have made the difference between the driver owing $70k and the driver owing $69k assuming a $1,000 deductible.
Even if you own your new car or luxury vehicle outright and aren’t required by a lender to insure the car for repair or replacement value, full coverage can mean the difference between financial disaster in case of an accident.
Liability-only coverage is the most cost effective coverage while full coverage is more cost and more coverage. Call us today to discuss the option in auto coverage that is most advantageous to you while protecting your other assets.
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Allied Insurance at The Insurance Loft
1630 Welton St. Ste. 202
Denver, CO 80202
1 (888) 688 1446