Full Coverage Car Insurance: What Is It, How It Works

“Full coverage car insurance” is not an actual insurance industry term: There’s no standard definition of what it means. The fact is that no car insurance policy can protect you in every possible situation, as “full coverage” might seem to imply.

In spite of this, the phrase “full coverage” is commonly used by insurance agents, car dealership sales associates, and vehicle financing company representatives. You might also see the phrase used online (in articles about insurance, for example). So just what are they talking about?

How full coverage insurance works

Full coverage car insurance typically refers to policies with the following types of coverage:

Coverages required by law

Coverages such as bodily injury (BI) liability and property damage (PD) liability are required in nearly every U.S. state. They may also include personal injury protection (PIP), uninsured motorist (UM), or medical payments (medpay) coverage, which is required in select states.

Coverages that protect you (and your lender) financially if your vehicle is damaged

Collision and comprehensive coverages can help pay for repairs if your car is damaged in an accident or by an act of nature. They may also include gap coverage, which pays the difference between what you owe on your vehicle loan and what your car is worth if your insurance company declares it a total loss.

These coverages are not required by law, but they may be required by your lender if you finance your car with a loan or lease.

Who needs full coverage car insurance?

Most vehicle loans or leases require full coverage car insurance. In other words, the lender will not provide financing unless you can show proof of insurance with these coverages.

Full coverage is also a good idea if you own an expensive vehicle, drive in heavy traffic, drive more miles than average, or live in an area with a high theft rate or frequent, damaging weather. Coverages such as collision and comprehensive provide a financial safety net for what could be very costly repairs.

What does full coverage car insurance cover?

Let’s take a closer look at the various coverages on a typical full coverage policy.

Your insurer may offer additional coverages that are not considered part of a full coverage policy but nevertheless may be useful. These include rental reimbursement, roadside assistance, and OEM parts replacement.

Understanding coverage deductibles

A deductible refers to your share of the costs when your insurance company pays a claim. Car insurance deductibles are a common feature of collision and comprehensive insurance coverage and may also be included with your PIP or UM coverage.

When you buy a policy with collision or comprehensive coverages, you’ll be asked to choose a deductible amount from a set of options: $500, $1,000, and $1,500 are common. Choosing a lower deductible results in a higher premium but also means you pay less if you have a claim.

Insurers like using deductibles because they create a shared responsibility. Without deductibles, the thinking goes, people would file insurance claims for every little nick and scratch on their cars. By limiting the number of claims, deductibles ultimately help control costs and keep insurance premiums reasonable.

An example of how car insurance deductibles work

Suppose you buy a car insurance policy with collision and comprehensive coverage. You then choose a $500 deductible for those coverages.

A few months later, a large tree branch falls and hits the front of your car. A body shop estimates the needed repairs at $5,000. You file a comprehensive claim with your insurance company. The company agrees to settle the claim and pays the body shop $4,500 for the repairs. You pay the remaining $500—the amount of your comprehensive coverage deductible.

How much does full coverage car insurance cost?

Because it provides a higher level of financial protection, full coverage car insurance policies tend to be more expensive than those with only the state-required coverages. According to a recent study of seven leading insurers by Moneygeek, using data from Quadrant Information Services, Nationwide had the cheapest full coverage insurance, on average, at $1,044 annually. And State Farm had the cheapest state-minimum policies, on average, at $524 annually. Figures are accurate and up to date as of March 2024.

Please note that we share this pricing information only to give you a general idea of the cost of car insurance. Your cost of insurance may vary dramatically from what is shown here.

How to get affordable full coverage insurance

Shop around

As we’ve seen, the average cost for a full coverage car insurance policy varies by several hundred dollars, depending on the insurance company. You owe it to yourself to get quotes from at least three or four companies to ensure you get the coverage you need at the lowest possible price.

Talk to an independent insurance agent

If you don’t have the time to shop around, contact an independent insurance agent. They represent multiple car insurance companies and can check with all of them to find the best policy for you at the lowest cost. Agents are also insurance experts who can make sure your policy includes coverages and other features that protect your finances.

Ask about discounts

Most major insurance companies offer various discounts to help you save on car insurance. These often include discounts for bundling policies (insuring your home and car with the same company), insuring multiple cars, and paying your policy in full rather than in installments. Check with your insurance company to see what it offers.

Consider usage-based insurance (UBI)

Not everybody likes the idea of their insurance company tracking their driving, but if you have no qualms about that—and you’re a safe driver—you could save with UBI.

Liability-only vs. full coverage insurance

Another common option for car insurance is a liability-only policy. As the term implies, a liability-only policy covers damage or injuries you cause to other drivers if you’re responsible for an accident. It won’t cover your own injuries or vehicle repairs.

TIME Stamp: Full coverage may be required by your lender

Full coverage car insurance typically refers to a policy that includes state-required coverages, such as BI and PD liability, along with collision and comprehensive. Full coverage is usually required by a lender if you finance your car purchase with a loan or lease. It may also be a good idea to have full coverage if your car retains a lot of value, you drive a lot of miles, or you live in an area with a high theft rate.

Frequently asked questions (FAQs)

Is $100 per month a good price for full coverage car insurance?

As mentioned earlier, Nationwide offered the cheapest average full coverage insurance policy, at $1,044 annually, or $87 monthly, according to a Moneygeek study (March 2024). So while you might be able to find cheaper coverage, $100 per month would seem reasonable.

Who typically has the cheapest full coverage car insurance?

Moneygeek’s survey had Nationwide offering the cheapest full coverage car insurance “for the average adult driver” at $1,044 per year among seven large companies.

Should you get full coverage insurance for your car?

If you finance a car purchase with a loan or lease, your lender will likely require you to have a full coverage insurance policy. Your lender’s representative should let you know when you apply for financing.

If you own your car outright, comprehensive and collision coverage will be optional (just remember that BI and PD liability are required by law). Consider getting full coverage car insurance if your vehicle retains high value, you live in an area with a high rate of vehicle theft, you drive more miles than the average, or you frequently drive in heavy traffic.

Which auto insurance coverage is not needed if your vehicle is still under the factory warranty?

Your factory warranty has no bearing on your insurance needs. The warranty covers repair costs related to vehicle defects, such as mechanical or bodywork issues. Insurance covers damage related to external events, such as accidents or theft.

Where can I get full coverage car insurance?

Most major car insurers offer “full coverage” policies, including BI and PD liability, PIP, UM, and medpay (where required), plus collision and comprehensive.