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Full Coverage Auto Insurance

'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.

 

Type of Collision InsuranceCovers for/Pay for
Broad Form collisionDamages with a deductible, if the owner/driver is substantially at fault.
Standard collisionDamages regardless of fault, with a deductible that always applies
Limited collisionOnly if owner/driver is not substantially at fault, and may or may not have a deductible.
Pays:Cost of repairs or the market value of the vehicle
Features:Costly coverage
Usually sold with deductibles
Does not cover mechanical breakdown
Does not cover normal wear and tear
Coverage offered regardless of fault

 

Comprehensive coverage: This covers your car for damages caused by various but different from collision such as fire, severe weather, vandalism, floods and theft. Damages such as broken glass, windshield damage etc are also covered. Many consumers choose to carry it. However, remember comprehensive coverage is an optional requirement, you are not required by law to carry comprehensive coverage.

 

Comprehensive Coverage
Examples of acceptable cause
I. Missiles or falling objects;
II. Fire or earthquake;
III. Theft or larceny;
IV. Explosive, Windstorm;
V. Hail, water or flood;
VI. Malicious mischief or vandalism;
VII. Riot or civil commotion;
VIII. Contact with bird/animal;
IX. Breakage of glass.
Pays:Cost of repairs or market value of the vehicle
Key Features:Covers cause other than collision
Also covers broken glass, windshield damage etc.

 

Who Requires Full Coverage?

The reasons to carry full coverage auto insurance may be optional to many people. There are some cases where this coverage is required. If you finance the purchase of your vehicle, lenders may insist on full coverage. Because, lenders consider your car as collateral against the loan offered to you. So, they want to coverage any potential damages to your car, so that it may remain useful for them incase they need to repossess this car.

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