Liability vs. Full-Coverage Car Insurance: What’s the Difference, and Which Is Best for You?

The debate between liability insurance vs. full coverage is common among car owners. Liability insurance helps pay for damages you cause to others in an accident, but it won’t pay to repair your vehicle. Full coverage includes liability plus collision and comprehensive coverage to protect your car.

When comparing auto insurance, the right choice depends on your budget, risk tolerance, and vehicle’s value. This article will break down the differences between both coverages to help you decide on the best and cheapest auto policy.

Key Takeaways:

• The national average monthly premium for liability-only coverage is $92, while full coverage costs $176.
• Most U.S. states require liability insurance, but lenders often require full coverage for financed or leased cars.
• Your state’s minimum liability limits won’t cover your injuries or damage to your vehicle.

Liability vs. Full Coverage: Key Differences

Liability Insurance: Covers Damage to Others

Liability insurance includes bodily injury and property damage liability coverage. That means it helps to pay for the other person’s medical bills and damage to their property when you’re at fault in an accident. But it doesn’t cover your injuries or damages to your car.

Every state except New Hampshire requires drivers to have liability insurance. Just know that each state has laws that spell out the minimum amount of coverage you must have to legally operate a vehicle on the road, so it’s important to know exactly how much your state requires.

Liability insurance pros and cons

Let’s look at some pros and cons of liability insurance and when to consider a liability-only policy.

Pros:

• One of the cheapest auto insurance coverages
• Meets minimum car insurance requirements
• No deductible if you file a liability claim

Cons:

• Doesn’t cover your vehicle or medical bills
• Doesn’t protect against theft of your car or personal items
• Lower policy limits may not cover all damages

When to consider a liability-only policy

Basic liability coverage isn’t for everyone. Although a liability-only policy at your state-minimum limits is the cheapest policy available, it puts you at greater financial risk. Still, a liability-only policy might be worth considering in situations such as the following:

• You’re on a tight budget and looking for low-cost coverage.
• Your car is older or has lost its value, so the cost of full coverage isn’t worth the benefits.
• You have a car you rarely drive or use as a secondary vehicle.
• You can afford to pay for your vehicle damage out of pocket.

That said, evaluating your situation before going with a liability-only policy is always important. Keep in mind that you can buy higher liability limits than your state requires and still have a liability-only policy.

Full-Coverage Insurance: Covers Damage to Your Car

A full-coverage policy usually includes liability, as well as collision and comprehensive insurance. Collision coverage pays for your car repairs, and comprehensive coverage picks up the tab for non-collision incidents like hitting an animal, theft, and weather damage like hail. But it won’t pay for routine maintenance or mechanical failures.

Lenders and leasing companies usually require you to have this coverage for the entirety of your lease or loan. Keep in mind that “full coverage” varies by insurance company and state. Some companies offer extras like rental car coverage and roadside assistance, while others don’t.

Full-coverage insurance pros and cons

Here are some pros and cons of full-coverage insurance and when to consider this type of policy.

Pros

• Covers accidents, theft, and natural disasters
• Pays for your vehicle repairs or replacement
• Meets lender or lease requirements

Cons

• Costs more than liability insurance
• Not always cost-effective for older cars
• Requires a deductible when filing a claim

When to consider a full-coverage policy

Most drivers should at least consider a full-coverage policy. Nearly 80% of drivers choose full coverage over liability-only insurance, according to the Insurance Information Institute (Triple-I).

A full-coverage policy may make sense in the following situations:

• You lease or finance your car.
• You have a newer car that still holds a lot of value, even if you’ve paid it off.
• You live in an area with high traffic, extreme weather, or high theft rates.
• You rely heavily on your car for daily activities.
• You can’t afford to pay out of pocket to replace or repair your car after an accident.

Liability vs. Full Coverage: Price Differences

Liability insurance tends to be significantly cheaper than full coverage, so having this policy alone can help you save on your car insurance costs. But keep in mind that rates vary by many factors, including your address, age, vehicle, and driving record.

The table below highlights the average monthly premiums for liability coverage vs. full-coverage car insurance, according to Compare.com data.

Full coverage costs nearly twice as much as liability-only insurance, on average. That’s because a full-coverage policy provides you with more protection since you’ll have collision and comprehensive coverage on top of liability insurance.

Next, let’s explore average auto insurance rates by state.

Average rates by state

Where you live affects car insurance premiums because rates vary greatly by state due to differing state-minimum insurance requirements, laws, and local risk factors.

The table below shows each state’s average liability and full-coverage premiums and the price difference between the two.

Michigan has the largest price gap between its liability and full-coverage policies — with full coverage costing $178 more per month, according to our analysis. New York drivers see the slightest difference, at just $34 per month.

Notably, Southern states like Louisiana, Georgia, and Florida have some of the highest monthly premiums, likely due to high accident rates, uninsured drivers, and population density.

The state you live in isn’t the only factor that affects your insurance bill. Next, we’ll examine how age can also influence rates.

Average rates by age

Age can significantly affect auto insurance premiums, with young drivers often paying the highest rates. Teens have the highest premiums for full coverage and liability-only insurance because insurers consider young drivers as high-risk — car accidents are the leading cause of death for 15 to 18-year-olds.

But rates drop as you reach their 20s and beyond — and drivers in their 50s and 60s have the lowest premiums.

Check out the table below to see the average monthly premiums for both coverage for different age groups.

Price differences between liability-only and full coverage for teens are huge — full coverage costs $142 more per month than liability alone, according to Compare.com data. As you age, the gap narrows, with drivers in their 50s and beyond paying about $65 extra for a full-coverage policy.

Next, we’ll consider how your driving record affects prices.

Average rates by driving record

Car insurance companies look at your driving record to gauge how risky you are behind the wheel. Drivers with clean records get some of the best rates. But if you get a ticket or accident on your record, insurers charge you higher premiums. Some incidents are riskier than others — the higher the risk, the more you’ll pay.

The data in the table below shows how different driving incidents can affect monthly insurance premiums and the differences between both rates.

Liability and full-coverage premiums will increase after a traffic ticket, but the $84-per-month difference isn’t a dramatic jump in cost. A recent accident can raise your rates further, especially if you’re at fault. But drivers with a recent DUI see the highest increase.

Even though a traffic infraction will increase your insurance rates, you can still save on your auto insurance costs. Below, we highlight some of the cheapest car insurance companies for both types of policies.

Cheapest Car Insurance Companies for Liability vs. Full Coverage

Every car insurance company has its own formula for calculating rates. That’s why shopping around is so important — one company might offer the lowest rates for liability coverage, while another might be cheaper for full coverage.

Let’s start by looking at the car insurers with the lowest rates for liability coverage.

Cheapest company for liability policies: Auto-Owners

The table below compares five of the cheapest companies for liability policies. It also highlights each insurer’s average monthly premiums, average annual savings for liability policies, and how each company scores on our rating scale.

Auto-Owners is the cheapest insurer with the most savings, according to our data. But paying more doesn’t necessarily guarantee quality coverage. For example, Hugo has the lowest rating for liability coverage but charges a higher monthly premium than Auto-Owners and USAA, which both earned higher Compare.com Ratings.

Let’s see which companies offer the cheapest coverage and most savings for full-coverage insurance.

Cheapest company for full-coverage policies: Auto-Owners

Now, let’s consider how insurance companies rank for full-coverage insurance by looking at the Compare.com Rating and average monthly premium for five of the nation’s top insurers.

Again, Auto-Owners offers the cheapest premium with the most savings per year for full coverage. But its Compare.com Rating is much lower than State Farm, which costs an average of $33 more per month. That’s why you might want to consider more than cost when shopping for car insurance policies.

What to Consider When Choosing Between Liability and Full-Coverage Car Insurance

Deciding between a liability or full-coverage policy is an important decision that can seriously affect your finances. Before you choose, you should weigh several factors, including the ones we highlighted below.

Your requirements

Most states require you to purchase a minimum amount of auto insurance coverage. But you may need full coverage if you have a car loan or lease. Check your state’s car insurance laws and financing agreement to make sure you have the right protection.

Your budget

Liability-only insurance can cost a lot less than full coverage. And if you’re on a tight budget, liability insurance may be the only affordable option. But the added protection of full coverage can be worth it in many situations if you can afford the higher payment.

Your risk tolerance

Risk tolerance describes your comfort level with paying out of pocket for car repairs or a replacement. If you have a high risk tolerance, you might be fine with liability-only insurance and paying potential repair costs after an accident. But if you have a low risk tolerance, you might prefer the added protection of full coverage.

Your car’s value

A car worth a few thousand dollars might not be worth the cost of purchasing full coverage. But purchasing full coverage is usually a smart financial move for high-value vehicles or if you’d struggle to repair or replace you total your car in an accident.

Your coverage limits

Choosing between liability-only or full coverage is just the beginning. You must also decide on coverage limits — the maximum amount your insurer will pay when you file a claim. States set minimum liability limits, but these limits only offer minimum coverage. Higher limits provide more financial protection but come at a higher cost.

It’s wise to buy more than the state minimum, according to Triple-I. That’s because you’re on the hook for the difference if you file a claim that exceeds your policy limit. Adding more protection to cover these costs is also recommended by the National Association of Auto Insurance Commissioners (NAIC).

Other Car Insurance Coverages to Consider

If you go with a full-coverage policy, ask what it covers and what it doesn’t. Some companies offer extra coverage as optional purchases.

A few add-ons you might want to consider if your policy doesn’t already have them include:

• Gap insurance: Pays the difference between what you owe on your loan and the car’s actual cash value.
• Rental reimbursement: Covers a rental car while your vehicle is undergoing repairs.
• Roadside assistance: Provides towing, jump-starts, and fuel delivery if your car breaks down.
• Rideshare insurance: Extends your auto policy to protect you while driving for Uber, Lyft, or another ridesharing service.

When to Drop Full Coverage

Full coverage doesn’t have to be a lifelong commitment. Dropping it may make sense if you pay off your car loan when your car reaches a certain age or if you rarely drive it.

Keep in mind that having liability-only coverage isn’t a decision to take lightly. Before making changes to your insurance policy, weigh the pros and cons beyond the immediate benefit of a reduced rate.

Liability vs. Full Coverage FAQs

Car insurance policies can raise many questions, especially when choosing between liability and full coverage. Consider these answers to common questions people have about the two coverages.

What’s the difference between full coverage and comprehensive coverage?

A full-coverage policy typically includes collision coverage. This coverage pays for damages from something other than a collision, such as hitting a tree, vandalism, or hail damage. But comprehensive coverage won’t pay to repair or replace your vehicle after a collision with another car.

What does it mean to only have liability coverage?

Liability-only coverage means your insurance will pay for injuries and damage you cause to others in an accident, but it won’t cover repairs to your car or your medical bills. Instead, you’ll need to pay for your own car’s damage if you’re at fault in an accident.

Should you keep full coverage on your paid-off car?

It depends on your unique situation. The choice to keep full coverage on a paid-off car depends on your car’s value and your risk tolerance.

If your vehicle is older and not worth much, liability only may be enough if you can afford to replace it if you total it. But you might want to keep it even on a paid-off car if you’re not comfortable paying for major repairs.

Why is liability insurance so cheap?

Liability insurance is cheaper than full-coverage insurance because it offers much less protection. Insurance companies charge less for liability because the risk of paying out a significant amount of money — or any at all — is much lower than for full coverage.

Data Methodology:

Data scientists at Compare.com analyzed more than 50 million real-time auto insurance quotes from more than 75 partner insurers in order to compile the rates and statistics seen in this article. Compare.com’s auto insurance data includes coverage analysis and details on drivers’ vehicles, driving records, insurance histories, and demographic information.

All the rates listed in this article have been collected from a combination of real Compare.com quotes and external insurance rate data gathered in collaboration with Quadrant Information Services. Compare.com uses these observations to provide readers with insights into how auto insurance companies determine their premiums.

Rating Methodology:

Compare.com’s mission is to help our readers make more informed decisions about their personal finances. Our editorial staff has crafted a proprietary, objective rating formula — the Compare.com Rating — to make it easier for our readers to analyze and compare many of the industry’s most well-known insurers.

The score you see referenced in this article is based on several factors, including:

• Cost: How the insurer’s average rates compare to its direct competitors and the industry as a whole. This includes available savings opportunities, such as discounts and other factors.
• Customer satisfaction: How satisfied existing customers are with the service they receive. This includes the insurer’s scores among various third-party studies, such as the J.D. Power U.S. Insurance Shopping and Claims Satisfaction studies and the National Association of Insurance Commissioners (NAIC) Complaint Index, among others.
• Ease of use: How easy it is for policyholders to utilize their policies. This includes mobile app availability, customer service availability, payment flexibility, and other related factors.
• Availability: The overall scope of the company’s insurance offerings. This includes available coverage types, national footprint, and other related factors.
• Industry reputation: A measure of the insurer’s overall standing within the industry. This includes its AM Best financial strength rating, BBB accreditation, and other related factors.

Sources

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2. University of North Dakota, “Learn more about the differences between liability and full coverage car insurance,” accessed May 20, 2024.
3. Insurance Institute for Highway Safety, “Fatality Facts 2021 State by state,” accessed May 20, 2024.
4. Insurance Information Institute, “Facts + Statistics: Uninsured motorists,” accessed May 20, 2024.
5. NOAA SciJinks, “The Most Extreme Weather in America,” accessed May 20, 2024.
6. U.S. Census Bureau, “Population Density of the 50 States, the District of Columbia, and Puerto Rico: 1910 to 2020,” accessed May 20, 2024.
7. National Highway Traffic Safety Administration, “Teen Driving,” accessed May 20, 2024.
8. Insurance Information Institute, “How much auto coverage do I need?,” accessed May 20, 2024.
9. National Association of Auto Insurance Commissioners, “What You Should Know About Auto Insurance Coverage,” accessed May 20, 2024.