‘Full Coverage auto insurance’, this term is rarely used by insurance providers in their information material. This is because, full coverage gives an impression that all risks associated with auto accidents are covered and therefore no extra coverage is needed. However, in insurance there is no ‘one single policy’ that can cover all risks of the automobile owner and/or driver. Therefore, ‘Full Coverage’ gives a totally different impression of risk coverage than what is covered in reality.
The term ‘Full Coverage’ refers to collision and comprehensive insurance coverage. However, before explaining collision and comprehensive insurance coverage, let us go through the state laws regarding auto insurance coverages.
Mandatory and Optional Coverages:
There are two types of auto insurance coverage. First, is mandatory coverage and the second is optional coverage. As the name itself defines, mandatory coverage i.e. liability coverages is legal requirement made mandatory by law. Also, States have prescribed minimum limits of liability coverages that all automobile owners and/or drivers must carry e.g. but liability insurance coverages covers only other’s injury or property damage caused by you. It does not cover damages to your vehicle. Therefore, you need coverage that can cover your risks, which is the function of second type of coverage. Optional coverage is used to cover one’s own risk or potential damages. This is called optional coverage because it not required by law.
Collision & Comprehensive Coverages:
Since, liability coverages do not cover one’s own damages, usually people assess their own risk potential, based on which they tend to take additional coverages, which makes them completely insured from any risk that may arise due to automobile accidents. This is the why people tend to call these additional coverages (mainly collision and comprehensive coverages) full coverage.
Collision Insurance: This covers the physical damages to your car occurred due to collision with another vehicle or object such as tree or another car etc., regardless of fault. In this case, collision insurance coverage pays the lower amount between the cost of repair of your auto and its fair market value. Collision insurance coverage is relatively costly. Therefore, people tend to avoid collision insurance coverage for old cars. Otherwise, you may end up paying more money as premium than the amount you may ever claim for your old car. Also, collision coverage, is usually sold with deductible and the larger the deductibles, the lower the premium amount that you may have to pay.
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