CarInsurance.com Insights
- Full coverage is required if you have a car loan or lease. It includes liability, collision and comprehensive insurance.
- Some insurers may include coverages such as uninsured/underinsured motorist coverage or medical payments/PIP, depending on state regulations.
- Full coverage may not be cost-effective for cars worth less than $5,000.
- Dropping full coverage could save you money, but only if you have enough savings to repair or replace your vehicle in case of an accident.
When it comes to car insurance, “full coverage” isn’t a legal requirement — but it often is a financial one. If you’re financing or leasing your vehicle, your lender will almost certainly require it. Full coverage comprises liability, comprehensive and collision.
Do you need full coverage car insurance?
In general, if you’re still making payments on your vehicle, you’ll be required to have a full coverage policy until your vehicle is paid off. Once you stop making payments on your vehicle, you can change your policy limits. However, you may not want to if you’re happy with the amount of protection you have on the road.
To determine if you should change your policy coverage, it can help to weigh your needs and your budget. For example, if you dropped some of your protections, could you afford damages out of pocket? Do you feel comfortable knowing your vehicle may not be covered if it’s stolen or damaged by a tree during a windstorm? Could you continue to comfortably pay the same amount for car insurance?
It’s also necessary to consider your vehicle’s cost and what you’re paying for coverage. If your vehicle is worth less than $5,000 and it’s stolen, you may be wasting hundreds of dollars on premiums if it’s fully covered. However, if it’s worth more, you may need to calculate its worth compared to your premiums, and if the cost is worth the additional spend.
To determine this, start with your car’s actual cash value, or ACV. Next, compare the ACV with your annual premium payment.
ExampleIf you totaled your car and the payout would be $3,000, and you’re paying around $800 a year for comprehensive and collision, it might not be worth it. But if the payout is $15,000 and you’re paying $800 a year for insurance, it would be worth it.
What is full coverage auto insurance?
Full coverage car insurance isn’t a specific type of policy, but rather a common term that refers to a combination of coverage types that exceed the state minimum requirements. Typically, a full coverage policy includes:
- Liability insurance (bodily injury and property damage) is required by most states to cover injuries or damage you cause to others.
- Collision coverage helps pay to repair or replace your car if it’s damaged in an accident, regardless of fault.
- Comprehensive coverage protects against non-collision incidents such as theft, vandalism, fire, natural disasters or collisions with animals.
Some insurers or drivers may also include extras like uninsured/underinsured motorist coverage or medical payments/PIP, depending on state rules.
Full coverage offers broader protection than liability-only policies, making it especially valuable for newer or financed vehicles where lenders require it. However, it’s more expensive, so weighing the cost against the value of your car and your risk tolerance is key.
Full coverage vs. liability insurance
Most drivers choose between two types of auto insurance: liability and full coverage. Liability covers injuries and damages you cause to others and full coverage includes collision and comprehensive car insurance coverage.
The difference between the two comes down to having limited protection for damages and bodily injury should you be involved in a car accident. Additionally, some states have minimum levels of liability required in your state, which may mean you have varying levels of coverage based on where you live.
If you choose a liability coverage policy, you will purchase bodily injury liability car insurance and property damage liability car insurance in one policy. Under your coverage, the bodily injury car insurance will pay the medical bills of people you may injure with your vehicle during an accident. The property damage liability insurance pays for repairs or replacements of the other driver’s property you hit.
Full coverage provides both collision insurance protection and comprehensive insurance. The collision insurance will cover damages to your vehicle during an accident, even if you were found at fault. It will also cover a driver who doesn’t carry enough insurance to cover your vehicle’s damages.
Another protection under full coverage involves damages to your vehicle that occur from natural occurrences, such as fires, floods, hurricanes, falling tree limbs or collisions with animals, theft and vandalism.
Sophie’s tip
CarInsurance.com editors recommend liability limits of 100/300/100 with full coverage for most drivers. This means you have up to $100,000 for medical bills, bodily injury liability up to $300,000 per accident and up to $100,000 to repair the other driver’s vehicle and property that you damage.
Should you drop full coverage on your car?
Determining when to stop paying for full coverage can feel a little like a guessing game. You’ve finished paying off your vehicle, so should you stop fully protecting it? Can you financially afford an accident’s repairs, or worse, could you replace your vehicle easily if it were stolen?
Before you decide to cut the cord on full coverage, ask yourself the following questions to help guide you.
1. How old is your car?
When determining whether full coverage is a good option for you, consider your vehicle’s age. If your vehicle is under 10 years old, it’s wise to purchase comprehensive and collision coverage.
The value of your vehicle is higher than the extra amount you’d pay in premiums per year and should be protected in case of an accident. However, if your vehicle is older, you may want to consider its actual value relative to what you’d spend on a full-coverage policy. You can check your vehicle’s current value at Kelley Blue Book.
2. Can you replace or repair your car if it’s totaled or stolen?
Typically, if your vehicle is stolen, there is a high chance you won’t get it back in one piece. Additionally, if you’re in an accident and your insurer deems your vehicle a total loss, you’re going to be car shopping.
Could you afford a new one without full coverage protection? If this were a hardship, keep full insurance to prevent a sudden, significant loss.
It’s also a good idea to determine if your yearly comprehensive and collision payment equals 10% of your car’s actual cash value. If it does, you may want to consider dropping the coverage.
3. Could you pay to fix your car if it had a major mechanical issue?
Car replacements and repairs aren’t cheap. With proper maintenance and care, your vehicle should keep going smoothly. However, vehicles are not foolproof. Your car’s radiator could go out or the drivetrain needs replacement, or the head gasket is done. These are high-cost repairs and replacements.
So, if a $1,200 repair isn’t worth it because your car is only worth $3,000, then maybe $600 a year in insurance payments isn’t either.
Sophie’s tip
Run the math before you decide. Compare what you’d pay in comprehensive and collision premiums this year against your car’s actual cash value. If the premium is close to 10% of that value, dropping full coverage could be the smarter move — and you can always add it back later if your situation changes.
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Is full coverage car insurance a good investment?
We recommend taking a hard look at your finances and your vehicle’s value before deciding whether full coverage is a good fit for you. However, you might need some guidance on how to do that.
Consider the following seven steps as a guiding checklist to help you get started on this type of analysis.
1. Assess your vehicle’s value
Knowing how much your vehicle is worth can help you make decisions about your car insurance needs. If you know your actual market value, you can determine whether you need full-coverage car insurance. Here’s how to begin:
- Action: Use Kelley Blue Book or similar tools to find your car’s current market value.
- Details: Input details like make, model, year and condition for an accurate estimate.
- Expert tip: Regularly update your car’s value assessment, as it depreciates over time.
2. Estimate your potential losses
After learning what your vehicle is worth, it’s time to think about what would happen if it were stolen or damaged. Estimate what your finances and budget are and how much you could afford in this type of situation. Then begin with the next steps.
- Action: Consider the costs of major repairs, total loss or theft.
- Details: Research common repair costs and the total loss value for your car model.
- Expert tip: Understand your area’s risk factors (e.g., theft, natural disasters) to better estimate potential losses.
3. Compare insurance premiums
In general, you should periodically get at least 3 car insurance quotes. This provides you with an opportunity to compare quotes and potentially save money if you find a cheaper rate. You can use the following steps to guide your process.
- Action: Get and compare full coverage quotes from multiple insurance providers.
- Details: Ensure each quote uses the same coverage limits and deductibles.
- Expert tip: Look beyond price; consider the insurer’s reputation for customer service and claim handling.
4. Evaluate your car insurance deductibles
Deductibles are the amount of money you must pay out of pocket before your coverage begins. In general, the lower the premium, the higher the deductible. Take a look at the following action items to determine how your deductible factors into the best coverage option for you.
- Action: Analyze how different deductible levels impact your premium and potential out-of-pocket costs.
- Details: Consider scenarios with low and high deductibles to understand their effect on premiums.
- Expert tip: Choose a deductible that you can comfortably afford in case of a claim.
5. Analyze your personal risk factors
Insurance companies tend to assess risk based on several individual factors, including your personal driving record, age, gender, type of vehicle you drive and where you live. The more risky an insurer deems you, the more you may be looking at paying for premiums. Analyze your personal risk factors in the following steps.
- Action: Reflect on your driving frequency, history and parking situation.
- Details: More frequent driving or parking in high-risk areas might necessitate full coverage.
- Expert tip: Adjust your coverage based on changes in your driving habits or lifestyle.
6. Review your financing requirements
If you’ve purchased your vehicle from a dealership, chances are you are required to carry full coverage car insurance until the car loan is paid in full. In general, this is to ensure that the lender is financially protected if you are involved in an accident with your financed vehicle. Review the following steps to ensure you understand your financing requirements.
- Action: Check if your car loan or lease agreement requires full coverage.
- Details: Look for insurance clauses in your financing or leasing contract.
- Expert tip: Maintaining the required insurance is essential to avoid contract violations.
7. Make an informed decision
Now that you’re at the last step in your analysis, it’s time to put all your data together to decide what car insurance coverage meets your needs and your budget. Review the final steps to help you decide which coverage type is best for you.
- Action: Decide if full coverage is financially justified based on your analysis.
- Details: Weigh the total cost of premiums against the benefits of full coverage.
- Expert tip: Regularly reassess your insurance needs, especially after significant life or vehicle changes.
Final thoughts on buying full coverage for your car
If you’ve bought a new or used car from a dealership or you’re making payments on an auto loan, you’ll need full coverage car insurance on the vehicle until it’s paid off.
However, if you bought your used vehicle outright, you have the option to choose the type of coverage you think is best. Again, it helps to think about the ACV of your vehicle, consider the cost-benefit analysis and make a decision. Remember, you can start with full coverage car insurance and then shop around at renewal to find a better rate or coverage option.
Frequently Asked Questions: Full coverage
Is full coverage car insurance required by law?
No, full coverage car insurance isn’t legally required in any state. You’re only required to carry liability insurance, which covers bodily injury and property damage you cause to others. Full coverage is typically required when you lease or finance a vehicle. Most lenders require physical damage coverage to protect their financial stake in your car until it’s paid off.
What does full coverage car insurance include?
Full coverage includes three types of coverage: liability, collision, and comprehensive. Liability pays for injuries and damage you cause to others. Collision pays to repair your car after an accident, regardless of fault. Comprehensive coverage covers non-collision damage, such as theft, vandalism, and hail. You can also add uninsured motorist and medical payments coverage.
When should you drop full coverage on an older car?
It’s often worth dropping full coverage when your annual collision and comprehensive insurance premiums are roughly 10% or more of your car’s actual cash value (ACV). At that point, you’re usually paying nearly as much for full coverage insurance as the payout would be if your car were totaled.
Does full coverage cost more than liability-only insurance?
Yes. Full-coverage premiums are more expensive because the policy includes collision and comprehensive coverage, as well as liability coverage. The cost of full coverage depends on a variety of factors, including your car’s value, deductible, driving history, and location. Comparing quotes side by side is the best way to see the cost difference between full coverage and liability-only insurance.
How do you know if full coverage is worth it?
To determine whether full coverage is worth it, compare your car’s ACV to your annual comprehensive and collision insurance premiums. If a total-loss payout would comfortably cover the price of a new vehicle, and the premium is small relative to that payout, full coverage is worth having. If the payout is lower than your premium or is comparable, liability-only might make more sense.
Resources & Methodology
Source
Insurance Information Institute. “Facts and statistics: Auto insurance.” Accessed September 2026.
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