A tree fell on your new car during a heavy storm, and now it's a wreck. You need a tow truck and a rental, plus your car needs to be repaired or replaced. Time to call the insurance company. Good thing you have full coverage car insurance. Or do you?
Despite the popularity of the term, there is no such thing as full coverage car insurance. What the phrase "full coverage" typically refers to is an insurance policy with both liability and physical damage coverage. It can also describe a single policy that includes all possible coverages. Understanding exactly what your policy covers is an important part of owning a car.
What's Typically Covered?
What people commonly think of as full coverage is really a bundle of three distinct insurance options that offer the following protection:
- Liability Insurance: insurance that pays costs for the other party's injuries and repairs when you're at fault for an accident. You must have liability insurance before you can add comprehensive or collision coverage.
- Comprehensive Insurance: insurance that pays for damage not caused by a collision, such as a falling tree, theft, flood, fire, hitting an animal or damage caused by weather. It can also cover windshield replacement. The coverage included in comprehensive insurance can vary, so it's a good idea to carefully review your car insurance policy.
- Collision Coverage Insurance: insurance that pays for damage to your car when it collides with another vehicle, an object in the roadway, pothole, or flips over.
What's Not Covered?
When you tell your insurance agent you want full coverage, it's easy to assume you have every insurance coverage available. But many auto insurance options are not always included in policies. If you want to be fully covered, consider adding these:
- Uninsured and Underinsured Motorist Insurance: This coverage pays for your car repairs when the person who caused the accident cannot pay. This insurance is required in some states.
- Gap Insurance: This coverage is worthwhile if you buy a new car. Gap insurance helps you pay off your auto loan if your car is totaled when you still owe more than it's worth.
- Medical Payments Coverage: This coverage helps with post-accident medical bills for you and your passengers no matter who is at fault.
- Emergency Road Service Coverage: This coverage comes in handy when you're stranded and you need a tow or fixing a flat tire.
- Rental Car Coverage: This coverage reimburses you for rental expenses when your car is out of commission from a covered accident.
- After-Market Equipment Coverage: This coverage is important if you added extra electronics, expensive wheels, or other modifications to your car; Most insurance only covers factory installed parts.
Is Full Coverage Required?
State laws don't require you to have comprehensive or collision insurance. But if you lease or buy a new car, chances are your loan company will require a full coverage policy with a low deductible.
When Full Coverage Does Not Fully Cover You
Imagine you caused an accident, and the car you hit was a luxury sedan. Two of the passengers were transported to the hospital with life-threatening injuries. After the accident, you may find that you have the right type of insurance, just not enough of it.
When you choose a full coverage insurance plan, your policy will automatically be set to the minimum amount required, which varies from state to state. Most insurance policies express the amounts covered like this: 25/50/25 ($25,000/$50,000/$25,000). The numbers correspond to the maximum amount for each personal injury claim, the maximum amount for all personal injury claims in one accident, and the maximum property damages for one accident.
In the above scenario, it's easy to see how $25,000 would not cover emergency services for a seriously injured person, or be enough to replace a totaled luxury sedan. The injured party's attorney may demand you pay the difference between what your policy covered and the actual damages. If you own a home or have a savings plan, you may want to review the amount of coverage in your policy to keep your assets secure from court judgments that may exceed your insurance policy limits.
Talk to an Attorney About Your Auto Insurance Coverage Issues
Understanding your auto insurance policy can be a challenge. If you're struggling with an existing car insurance claim or just want to make sure you're properly protected, it's a good idea to speak with an experienced car accident attorney in your area.