Why Full Coverage Doesn’t Mean Everything is Covered?

Key Takeaways:

• “Full coverage” is not universal. It often refers to a bundle of liability, collision, and comprehensive insurance, but it does not always mean that every situation or expense is covered.
• Items like wear and tear, personal belongings, loan/lease gaps, and roadside coverage are not always included under standard full coverage policies.
• Additional add-ons like GAP insurance, uninsured motorist coverage, and MedPay will ensure drivers get the right protection for their needs.

When you hear ‘full coverage’ auto insurance, you may think that it covers all types of situations. However, full coverage does not mean total protection and is a misleading term used in the auto insurance industry.

From the marketing language used to undereducated consumers, confusion persists about what is really included in full coverage insurance. When you are purchasing auto insurance, be sure to clarify inclusions and exclusions with your insurance agent so that you can ensure that you are totally protected in all situations.

Let’s take a look at what full coverage insurance does and doesn’t cover so you can make smarter choices.

Breaking Down What Full Coverage Means

When it comes to auto insurance, context matters.

Full coverage insurance starts with a base combination of insurance policy types, e.g., liability, collision, and comprehensive insurance, rather than a standardized or all-inclusive policy. Each of these types of insurance provides different protection, including:

Liability Insurance

Liability insurance covers bodily injury and property damage that you cause in an auto accident. This does not include damage to your car or injuries you may sustain during the accident.

People with older vehicles that have little actual value will often opt for liability-only insurance coverage to save money and not over-insure a car that has little resale value. It can be a great way to save money if you own the car outright, but remember – in an accident, you walk away with nothing.

Liability insurance is required in most states as the bare minimum coverage required. A few states allow you to purchase a bond in place of liability insurance, which is intended to cover any expenses you incur in an accident. Check your state’s requirements here.

Collision Insurance

Collision insurance pays for the repairs or replacement of your vehicle if it’s damaged in an accident. It also covers accidents that may happen with an inanimate object, e.g., trees, poles, guardrails, etc.

While collision insurance kicks in regardless of who is at fault, there will be deductibles and limits that apply to your policy. Also, if your vehicle is financed through a bank or leasing company, they may require collision (and comprehensive) insurance to protect their interest in the property.

Comprehensive Insurance

Comprehensive Insurance covers all non-collision damage to your vehicle, e.g., fire, vandalism, theft, and weather-related or natural disasters. This also includes things like covering the damage sustained after hitting an animal or falling objects.

Like collision insurance, comprehensive insurance is required by all first lien holders, e.g., banks, leasing companies, etc.

Full Coverage Gives a False Sense of Security

People often expect that full coverage provides blanket protection, which is not the case. Depending on the insurance carrier, some common exclusions can include:

• Normal wear and tear and mechanical breakdowns, including routine maintenance, general aging, or engine failure.
• Gap coverage covers the difference between the value of the vehicle and the amount due on the auto loan or lease in the event of a total loss.
• Aftermarket accessories and custom equipment or parts, including up-market rims, sound systems, and custom paint. These may require a special endorsement.
• Ridesharing or commercial use, like for Uber or Lyft drivers and deliveries like DoorDash. This also includes car-sharing services like ZipCar where you can rent your car to others for a fee.
• Personal belongings, including laptops, phones, etc. These items may fall under your homeowners or renters insurance policies.
• Rental car reimbursement while your vehicle is being repaired.
• Intentional damage if you purposely damage your vehicle or cause harm to someone else.
• Unlisted or unnamed drivers who aren’t listed on the policy but cause an accident.
• Illegal acts like driving under the influence and causing an accident.

While insurance companies try to provide transparency, it’s up to you as the consumer to research exclusions and alternatives to ensure you have the best possible coverage.

Requirements Vary by State and May Not Be Adequate

Minimum liability laws in each state are typically decided legislatively and can result in coverage inadequacies that vary dramatically from state to state. Each state sets its own minimums for both bodily injury and property damage liability.

In other words, with liability coverage being the foundation of a full coverage policy, what’s considered full coverage in one state might be grossly inadequate compared to another. For example:

• The California minimum for liability is $15,000 per person/$30,000 per accident for bodily injury and $5,000 for property damage. So, if you cause a serious accident, your insurance will only cover $15,000 for someone else’s medical expenses, which is far less than what may be required.
• In Maine, the liability minimums are much higher: $50,000 per person/$100,000 per accident for bodily injury and $25,000 for property damage. While you may want even more protection, a Maine driver with “full coverage” is automatically better positioned than someone in California.

So, What Additional Coverages Should You Consider

At a minimum, there are some basic coverages that you should include in your ‘full coverage’ policy, including:

• Uninsured and Underinsured Motorist Coverage – This coverage is important to protect you against others who may not have adequate auto insurance or are underinsured.
• Medical Payments (MedPay) or Personal Injury Protection (PIP) – This coverage can be important to bridge the gap between healthcare costs that are covered on a regular policy and what your actual costs may end up being.
• GAP Insurance – Protect yourself from financial loss by having GAP insurance. If you should ‘total’ the vehicle, GAP insurance covers any difference between the replacement cost and the actual value of the financed or leased vehicle. This amount can be substantial, especially in the first years of a financial arrangement when the value decreases much faster.
• Roadside Assistance and Rental Reimbursement – This coverage can be extremely helpful if or when it’s needed. Rental costs can be exorbitant when the days add up, and having a car may be critical to your job or your family’s well-being. Plus, if you have ever needed roadside assistance, you understand how important this coverage can be and the peace of mind it brings.

While normal wear and tear coverage is never covered, additional, less common coverage addendums might include:

• Aftermarket or Custom Improvements – If you make upgrades or add on things like custom rims and paint detailing, or include aftermarket sound systems or navigational tools, you will need a special endorsement or addendum to your full coverage insurance policy to cover their cost for replacement.
• Commercial Use Addendum – Using your car for ridesharing or deliveries (like Uber or DoorDash) or renting out ‘carsharing’ your vehicle (like on Turo), or an RV or camper (like on Airbnb or Outdoorsy), requires a special addendum which some insurance companies don’t even offer. You may have to shop around for that particular coverage.
• Personal Property will be covered under your homeowners or renters policy, so be sure to include that possibility when selecting your coverage amounts for either of those types of insurance.

Is Full Coverage Worth It?

It’s important to evaluate the cost vs risk when shopping for any type of insurance, and full coverage is no different. Your decision will require balancing things like your financial situation, car age, and tolerance for risk.

Full coverage makes sense for new and high-value cars, as well as any financed vehicles. But for older cars with low market value, liability-only insurance may suffice. In most cases, full coverage is recommended, and the different add-ons will make sense depending on your particular financial situation and risk aversion.

Consider Discounts to Offset Costs of Full Coverage Insurance and the Associated Addenda

There are basically four categories of discounts available from insurance companies: driver history and behavior discounts, policy-based discounts, vehicle-based discounts, and driver status and affiliation discounts. Be sure to evaluate your discount opportunities when shopping for any type of insurance—it can be well worth your time.

Driver History and Behavior Discounts

• Safe Driver – Maintaining a safe driving record with no accidents or moving violations can qualify you for a significant discount.
• Defensive Driving Course or Senior Driver Course – Completing approved coursework, especially for drivers 55 or older, can earn a discount.
• Low Mileage Discount – If you drive, commute, or work remotely, you could save on low mileage – driving less, less opportunities for accidents.
• Usage-Based Insurance – Insurance companies now offer telematics devices or phone apps that can monitor your driving habits. They reward drivers who maintain safe speed and braking behaviors.

Policy-Based Discounts

• Multi-Policy and Multi-Car Discounts – Bundle your homeowners/renters and auto insurance with the same company and save money.
• Paid-in-Full – Pay your full policy at one time instead of monthly payments and garner a discount.
• Paperless Billing and Auto-Pay – Most insurance companies will give you a discount if you use paperless billing and sign up for auto-pay. Saves them money, and they pass along the savings to you.

Vehicle-Based Discounts

• Safety Features – You can receive discounts when your car has safety features like anti-lock brakes, airbags, and daytime running lights.
• Anti-Theft Devices – If your vehicle has an anti-theft or tracking device, you can receive a discount on your comprehensive policy.
• All Electric and Hybrid Vehicles – Some insurers will offer a discount on eco-friendly cars and trucks.

Driver Status and Affiliation Discounts

• Good Student Discount – High school and college drivers can earn an insurance discount by maintaining a good grade point average (usually ‘B’ or above).
• Homeowner Discount – Owning your own home can garner you a discount. It shows you are highly responsible and settled.
• Military Discounts – Many insurers offer active-duty personnel and veterans, and their families, discounts.

Protect Yourself by Understanding Your Insurance

Insurance selection is a big decision, and you want personalized insurance planning to find the best solutions for your financial situation.

Find a reputable insurance agent and company that can provide you with targeted information that answers all of your questions, like “What does this policy cover and what does it exclude?” and “Can I save money on policy addendums through discounts?” Starting with a visit to a site like einsurance.com can set you on the right path to find a long-term partner that’s knowledgeable about the ins and outs of insurance.

Final Thoughts

Remember, ‘full coverage’ does not mean all-encompassing! Full coverage insurance provides a solid foundation but may require supplemental coverage to fill in any gaps.

By understanding possible exclusions and how adding strategic endorsements can expand your protection, you can gain true peace of mind for the long term.

Life changes on a regular basis. Regularly review your insurance coverage and costs with a trusted insurance partner to guarantee you are well-positioned to absorb the unexpected.

Contact einsurance.com to learn more about auto, home, business insurance, and more.