One of the most important decisions you’ll make about your auto insurance is whether to carry just the state minimum coverage or opt for “full coverage.” The right choice depends on your financial situation, the value of your vehicle, and your tolerance for risk. Making the wrong decision could either waste your money or leave you dangerously underprotected.
What Minimum Coverage Includes
State minimum coverage typically includes only liability insurance — the coverage that pays for other people’s injuries and property damage when you’re at fault. In no-fault states, the minimum also includes Personal Injury Protection. This is the bare legal requirement to drive, and it protects other people, not you or your vehicle.
With minimum coverage, you have no protection for your own vehicle in an accident. If your car is totaled, stolen, or damaged by a storm, you’ll pay for repairs or replacement entirely out of pocket. Your own injuries in an at-fault accident may also not be covered, depending on your state.
What “Full Coverage” Really Means
Full coverage isn’t an official insurance term, but it generally refers to a policy that includes liability coverage at higher-than-minimum limits, collision coverage for damage to your vehicle from accidents, comprehensive coverage for non-collision damage like theft and weather, and usually uninsured/underinsured motorist coverage and medical payments or PIP.
Full coverage provides comprehensive protection for both you and others, but it costs more than minimum coverage — typically 50% to 100% more, depending on your vehicle and circumstances.
When Minimum Coverage Makes Sense
Minimum coverage might be appropriate if your vehicle has low value and you could afford to replace it. It may work if you have very limited financial resources and need to keep insurance costs as low as possible. It could be suitable if you rarely drive and your exposure to risk is minimal. However, even in these situations, carrying only the state minimum liability limits is risky because a single serious accident could exceed those limits.
When Full Coverage Is Worth It
Full coverage is strongly recommended if you’re financing or leasing your vehicle, as your lender will require it. It’s wise if your vehicle is worth more than a few thousand dollars. It’s essential if you have assets like a home or savings that could be at risk in a lawsuit. And it’s advisable if you couldn’t afford to cover medical expenses or a vehicle replacement out of pocket.
A Middle Ground Approach
You don’t have to choose between bare minimum and maximum coverage. Consider carrying higher liability limits than the state minimum while choosing higher deductibles on collision and comprehensive to keep costs down. This gives you strong protection against lawsuits while still covering your vehicle, all at a moderate cost. Many insurance experts consider 100/300/100 liability with $1,000 deductibles for collision and comprehensive to be a good balance of protection and affordability.
