Full coverage means different things to different individuals. It is often used by drivers to describe the coverages they carry on an auto insurance policy. It is also used by lien-holders to describe the type of insurance they require a loan customer to purchase. Legally, however, full coverage is a very subjective term and may leave consumers vulnerable to loss if they are not covered adequately.
Many consumers refer to certain portions of an automobile insurance policy as "full coverage" insurance. Auto insurance has many parts but not all coverages are applicable to all drivers. When a driver says they have "full coverage" insurance, it may not mean they have all the coverage they need. Most individuals who refer to full coverage are typically referring to the comprehensive and collision portion of an auto insurance policy in addition to required liability and/or personal injury protection coverage.
Comprehensive and Collision
Comprehensive insurance will reimburse a policyholder for loss or damage due to theft, vandalism, wind, flood or collision with an animal. Comprehensive is also referred to as "other-than-collision" insurance because it covers losses not caused by an auto accident. Alternately, collision insurance covers loss or damage resulting from an auto accident. If a vehicle collides with a stationery object, damages will also be covered under the collision portion of the policy. Both comprehensive and collision insurance are subject to a policy deductible. A deductible is a small portion of the loss that the policyholder must pay out of pocket before the insurance company pays. Insureds are free to choose a deductible they feel they can afford if a claim is filed. Deductibles range from $50 to $1,000 or more. The lower the insurance deductible, the higher the insurance premium.
Many people are under the assumption that if they carry liability insurance, medical payments coverage, and comprehensive and collision coverage they are protected at any time for any reason. This is not the case. Insurance policies are limited in the extent of coverage they provide. For example, insurance policies do not automatically cover a tow from the scene of an accident or rental car while a vehicle is being repaired. Policyholders must request these additional coverages and not assume they are not automatically included in the insurance policy.
An important note to consider is that insurance policies only cover the actual cash value of a vehicle if it is totaled or stolen. This means the policyholder will only be reimbursed for the depreciated value of the vehicle. Typical auto insurance policies will not pay off a car loan. Policyholders should carefully consider what coverages apply to their insurance policy and to what extent. Insureds should inquire about what they are getting when requesting full coverage insurance to avoid any surprises if a claim is filed.