What Is Full Coverage Insurance for an Auto?

by Candace Webb, Demand Media
    A wreck can happen at any time, you need to be covered.

    A wreck can happen at any time, you need to be covered.

    In most states, auto insurance is required by law if you are going to drive. However, each state sets minimum coverage requirements that will repair the other person's vehicle and pay medical expenses if you cause an accident. Auto insurance comes in two forms, minimum liability and full coverage. If you want your vehicle repair covered by the cost of your insurance, you need full coverage with a large enough amount to cover the cost of fixing or replacing your car.

    What is Insurance

    Insurance uses a business model that pits the insured against the insurance company with regard to the outcome. You pay premiums with the belief you will eventually have an event that will cost more to repair than your invested premiums cost. The company believes you will not have an event and that it will make money off collecting your premiums. While many types of insurance are elective, auto insurance is not.

    The Difference

    The primary difference between minimum coverage and full coverage is that full coverage covers just about anything that happens to your vehicle, regardless of fault. If you cause an accident, run into an object or run off the road, a coverage policy will cover the damage. If your car is vandalized, broken into or stolen, the full coverage policy covers the repair bill or, if necessary, replace the vehicle.
    A minimum coverage policy only pays for damage to the other vehicle or object that you cause due to an accident that is your fault.

    When it is Required

    If you took a loan to buy your car, the lender requires you to have full coverage on the vehicle. This is because they want to know that the car will be replaced or repaired if something happens to it. The lender's concern is if you wreck the car and cannot get it repaired you will stop paying on the loan, therefore, the lender insists on you maintaining full coverage for the life of the loan.

    Other Times it Should be Purchased

    According to greatinsuranceworld.net, you should carry full coverage on your vehicle if you do not have enough money in savings to purchase another car if something happens. Even if you believe that you are a careful driver and will not get in an accident, your car can be stolen, a tree can fall on it or it can be vandalized.

    Cost Effectiveness

    Full coverage insurance costs more than minimum coverage because the risk of having to pay for damages is increased when full coverage comes into play. You can reduce the cost of the policy by increasing deductibles, reducing moving violations and shopping around for a cost effective company.

    No-fault States

    Several states require drivers carry no-fault insurance. No-fault insurance does not pay for repairs to your vehicle regardless of who caused the accident. If you reside in a no-fault state, you must purchase additional coverage if you wish to have your vehicle repaired after a collision. In all but no-fault states, if the other driver caused the accident, that driver's insurance is responsible for paying for your damages, regardless of whether you had full coverage.

    About the Author

    Candace Webb has been writing professionally since 1989. She has worked as a full-time journalist as well as contributed to metropolitan newspapers including the "Tennessean." She has also worked on staff as an associate editor at the "Nashville Parent" magazine. Webb holds a Bachelor of Arts in journalism with a minor in business from San Jose State University.

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