When people refer to "full coverage" auto insurance, they typically mean a policy with state-mandated minimum liability insurance as well as collision and comprehensive insurance, which covers vandalism, theft and/or glass breakage. In some cases, people may refer to the liability insurance each state requires as full coverage under the law. However, when communicating with insurance companies, the generally accepted phrase "full coverage" refers to physical damage coverage, including comprehensive and collision insurance as well as the state's minimum liability coverage.
Liability coverage is insurance for any property damage, bodily injury or death a driver may cause; however, it does not include the driver's personal vehicle. The minimum insurance coverage required for most states is liability insurance, providing coverage for injured persons and property damage. Auto loan companies require liability insurance at the very least. A leased vehicle may be required to carry a specified level of coverage that may be higher than the state requirements. When selecting the limits of coverage for liability insurance, drivers must be aware that if the damage caused is more than the limit of the policy, the driver is financially responsible for the excess, which could create a financial hardship.
Comprehensive coverage is a shortened name for Comprehensive Physical Damage Coverage. This coverage pays for any damage to the driver's vehicle, other vehicles the driver may operate, theft of the vehicle or disasters, including fire or flood.
Collision coverage pays for the driver's vehicle when it is hit by another vehicle or object, or when it hits another vehicle. This coverage only pays for the current value of the vehicle and does not provide for restoration of aftermarket vehicle enhancements or the value of any loan the driver may be paying.
Deductibles may be set by the purchaser of the insurance policy and are not subject to review of the car's lessor or other creditor. The deductible is the amount that must be paid before the coverage applies. For example, if the loss is $2,500 and the deductible is $500, the insured must pay $500 before the insurance pays the remaining $2,000.
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