Understanding Full Coverage and Liability Coverage in Auto Insurance

Mike Johnson
Mike Johnson, Insurance Broker at EIG

With auto insurance, it is easy to ignore the nuance involved and go for the required minimum per State when it comes to auto insurance. But spending the minimum could come at a cost because the different insurance packages have different coverage and limits spelled out in the terms. We should pay attention to these terms before making an important decision. Our producer, Mike Johnson, breaks down what the coverage and limits of the term are and how auto insurance shoppers can make informed decisions when picking a policy.

Mike starts his conversations with a client or potential client by trying to understand the policy which would best suit them; be it full coverage or liability coverage, he goes ahead to explain the differences. “Often, the clients are unaware of the differences with the coverage types, and so I simplify the language to help them make the right choice.”

As stated earlier, there are two types of Auto Insurance; full coverage and liability coverage. Each type comes with different tiers and premiums.  

“Full coverage” is when you get the mandatory liability coverage which pays for the damage you inflict on other people and property plus comprehensive and collision. Comprehensive cover takes care of damages to your car caused by events that are out of your control. It covers things like theft, vandalism, glass and windshield damage, fire, weather/acts of nature. Collision, on the other hand, helps pay to repair or replace your car if it’s damaged in an accident with another vehicle or object, such as a fence, tree or animal. Ideally, full coverage means you have insurance in the types and amounts that are appropriate for your income, assets and risk profile. The point of all types of car insurance is to keep you from being financially setback by an accident or incident. Making the right choice may be one of the most crucial decisions you would make in your life.

To explain further, Mike added that “full coverage pays for the damage you do to others, up to your liability limit. It also pays for your car, up to its fair market value, minus your deductible in case of a total loss, if you are at fault or if the car is destroyed by a natural disaster or is stolen.”

Full coverage also pays for your injuries as well as your passengers’ injuries, if you are at fault, up to the amount of your bodily injury limits. It also covers these injured people if you are hit by an uninsured motorist, up to the limits of your uninsured motorist coverage.

Liability coverage, on the other hand, is meant to protect you from having to pay huge amounts to people in case you are sued for an accident which was your fault. According to Mike, your policy and coverage depends on the value of your assets, or what your combined savings and property are worth.

 Liability covers bodily injury liability protection and helps to pay for the medical expenses of the other party if you are found at fault in the accident. In some circumstances, it may even cover lost wages and/or legal fees if the injured party files a lawsuit depending on the policy limits.

It also pays for damages to property resulting from a covered accident in which you’re at fault. It covers the other party’s vehicle repair or replacement costs, as well as other property that may have been damaged in the accident, such as fences, structures, phone poles and other types of property.

“Liability insurance is highly dependent on your financial situation and the property being insured, so be wary of generic liability coverage recommendations you might see. The more you own, the more liability insurance you should have.”

For Mike, it is not just about selling policies, it is about making sure the client is getting the best value that fits their specific needs. “Every client is unique, some of them know what they want. Others don’t, and it is up to me to assess their needs and recommend the best policy for them. For us at Everett Insurance Group, the needs of our customers come first!”

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