Full Coverage Car Insurance Is a Myth
There is no such thing as “full coverage car insurance.”
Full coverage car insurance is a vague and arbitrary term that really doesn’t mean anything. What seems like full coverage to one person may be minimal for others.
Ask your friends or family what kind of car insurance they have, and they’re likely to say one of two things. Either they’ll say, “I have minimum coverage” — which is what a state mandates you to carry, in terms of coverage — or “I have full coverage.” Usually, there’s no in-between.
When the term came into common usage years ago, it served as a generalized way to speak about having different coverages such as collision and comprehensive insurance in one’s auto insurance policy. Collision insurance covers property damages that you, as a driver, might incur upon another driver’s vehicle, if you were to cause an accident. Comprehensive insurance is property damage that occurs in situations that don’t involve a crash, such as wildfire or a tree falling on your car during a bad storm.
Put Down Your Full Coverage Car Insurance Calculator
When you really think about all possible accident outcomes, is there ever a situation in which you can be entirely covered in full?
Let’s just use the most obvious example — one that’s really quite hard to imagine. Suppose that you’re in a car accident and you kill the other driver. There is no way to purchase a policy that would be commensurate with the loss of a life. You can’t say, “I’m fully covered. If I kill someone, I have enough insurance to protect myself.”
How do you value a human life? It’s really hard to put a dollar amount on the other person’s life. From a legal restitution standpoint, it’s well into the seven figures — possibly eight figures and beyond. And if a car accident resulted in multiple fatalities? Commonly accepted ideas about full coverage assuredly do not take such scenarios into account.
So, if you’re conducting an online search for a full coverage car insurance calculator, stop right now. Put the topic to rest and move along. You can only have a level of insurance coverage that would be considered adequate or sufficient. Think instead about coverage that you think is sufficient for your financial position and how much coverage you would need in the event of a terrible accident.
Think About Achieving Adequate or Sufficient Coverage Instead
How do you decide how much car insurance to buy? Start the analysis by asking yourself, “How much coverage do I want to carry to adequately protect myself, to make sure that I’m not personally responsible for paying for injuries and damages out of my own pocket?” In other words, ask yourself how much insurance can you purchase so that you will never have to write a check out of your personal bank account, to pay for damages that may happen if you cause an accident.
Your analysis may start with questions such as, “Do I own home? Do I have a business? Do I have things that could be in jeopardy if I cause an accident, and I don’t have enough coverage to protect me, and then the person I harmed comes after me personally?”
Whether you have a lot of assets or feel as if you don’t have much to protect, you will still want to put yourself in a position where you are protecting others in the event that you cause an accident. That is truly a matter of civic duty and personal responsibility, regardless of your financial position. You can still purchase more car insurance than the state minimum.
Fact is, you can get good coverage that projects you in the event that a very bad accident were to happen. If your state-minimum insurance is $15,000 in per-person bodily injury liability coverage, try asking your insurance broker or insurance carrier to give you a price for 10 times that amount, or $150,000. Compare the price of that coverage with the state-minimum, and most likely you’ll find that they difference in price is not significant, especially when parceled out as a per-month cost.
UM, UIM and Umbrella Coverage
You can also look into uninsured motorist coverage (UM), underinsured motorist coverage (UIM), and an umbrella policy that would kick into effect if the underlying coverages are insufficient. UM is designed to protect you when another driver lacks insurance. UIM protects you when the other driver has an inadequate policy limit, such as the state minimum. One recommendation is to purchase UM and UIM in the same amount as your liability insurance. In other words, if you’re going to purchase a bodily-injury liability policy of $100,000 per person, per accident, purchase a UM and UIM policy in the same amount to protect yourself.
Umbrella coverage is an extra layer of liability coverage that kicks in when your underlying coverage limits are met. Remember, medical expenses can reach seven-figure amounts. In an event when the other driver does not have enough insurance, umbrella coverage ensures that you have additional protection. You can have anything from $1 million to $5 million in umbrella coverage.
Bottom line, you don’t want to experience a very bad crash and then wish you had the right amount of coverage after the fact.
My Idea of Adequate Car Insurance
In closing, I would like to share my car insurance coverage limits to show you that I put my money where my mouth is. I wouldn’t encourage you to do something that I don’t do myself!
- $500,000 Liability Coverage (to protect others)
- $100,000 Property Damage (to fix someone else’s vehicle)
- $1,000,000 Umbrella Coverage (to protect others)
- $500,00 UIM/UM Coverage (to protect myself and passengers)
- $1,000,000 Umbrella Coverage on UIM/UM (to protect myself and my passengers)
- $50/day rental reimbursement (for a rental while my vehicle is being repaired)
- $5,000 Med Pay (for medical expenses related to a crash)
- Comprehensive and Collision Coverage (to repair my vehicle)
- $500 deductible
Regardless of how much coverage I have, I would never say that I have full coverage car insurance. Instead, I will tell you that I have what I consider to be sufficient coverage — or in alignment with my financial position.
Next time you shop for insurance, remember that there are many good people out there who can guide you on how policies work and what coverage they recommend for you. Insurance brokers, in particular, can be a great resource. I like using a broker, because rather than obtain quotes from multiple insurance companies separately, the insurance broker can collect quotes for you. By looking at coverage limits and prices from multiple insurance companies, you can confidently make an educated decision.