What Is Considered Full Coverage Auto Insurance?
"Full coverage" is a term used in insurance which generally refers to policies covering costs incurred to both the insured driver's vehicle and those of others involved in a crash, along with personal injury and damage caused by reasons other than a collision. The precise usage of the term can vary, making it important to check policies carefully. Despite the term, some risks are not covered, particularly with rented or leased vehicles.
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Confusion
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"Full coverage" is commonly used as a synonym for "comprehensive" coverage. As both terms are somewhat subject to definition, it is not safe to simply assume that one "full coverage" policy offers the same protection as another "comprehensive" policy. Drivers should always check carefully to make sure they know exactly what is covered.
Comprehensive Plus Collision
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Part of the confusion over terms is that full coverage polices often incorporate both collision and comprehensive coverage. Collision coverage means that the insurer will pay the repair or replacement costs for the insured vehicle if it is involved in a collision held to be the fault of the insured driver. Comprehensive coverage covers the repair or replacement costs of the insured vehicle if it is damaged for reasons other than a collision. The most common reasons are fire or theft, though it could also cover damage caused by striking an animal.
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Liability
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Liability insurance covers a driver against the costs of damage caused to other drivers or vehicles. In most states, liability insurance is a mandatory requirement, though the minimum coverage limit varies. A policy sold as "full coverage" will normally include liability insurance as well as collision and comprehensive coverage, but it is always worth checking.
What's Not Covered
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Full coverage does not cover every potential loss. It may only cover towing costs that are the result of a collision for which a claim is made, and may not cover costs related to a mechanical breakdown. It also may not cover the costs of damage to personal property that result from a crash. Another potentially uncovered cost is lost earnings by a person who relies on the vehicle for business.
Rental and Leasing
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When a driver rents a car, her existing liability insurance will usually cover her to drive that vehicle. Her insurance, however, will not always offer full coverage: this is because the rental car may be more expensive to repair or replace than the driver's own vehicle, which will have been used as the basis of her premiums. Collision or comprehensive damage will usually be offered by the rental company.
A full coverage policy will only usually pay out to the current market value of a vehicle. With a leased car, this payout may be lower than the amount remaining to be paid on the loan. It is usually possible to take out additional coverage to make up the shortfall through what is known as a GAP policy.
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References
- Photo Credit Crash on the street. German auto model 2007. image by Dariusz Kopestynski from Fotolia.com
