Does full coverage insurance really exist?
I want Full Coverage!
“Full coverage is an insurance term used by many, but understood by few.
I hear it every day, when speaking of automobile insurance, the customer says I want full coverage.
But when I ask them what that means to them, they have no idea. Or they think that it means that everything is covered I can tell you up front, that there is not an insurance policy in the world that will cover everything.
Do you know what it means to have full coverage?
Do you see the term full coverage anywhere in your insurance policy? No. That is because there it does not really exist in the insurance world. Yet, everyone uses this term as a universal term.
In auto insurance. when people say full coverage it implies that they are looking for both liability insurance coverage and physical damage coverage to cover their vehicle.
Full coverage is generally used by the lender on the vehicle to indicate that they are requiring physical damage coverage (comprehensive and collision coverage) for the vehicle that have a lien.
The problem is that there is no such thing as full coverage. And different interpretations of the full coverage can lead to gaps and unpaid losses.
I have seen on popular carriers’ websites that they define full coverage as minimum liability coverage with maximum deductibles for comprehensive and collision coverage.
Does that really sound like full coverage?
Minimum liability coverage is not sufficient to cover even minimal accidents. In Maryland, the minimum liability coverage is $30,000 per person/$60,000 per accident and $15,000 property damage. How many vehicles are on the road are worth less than $15,000.
So, what happens if the claim exceeds your liability coverage?
You could be held personally responsible. And you may have to sell off assets such as your home, or other assets to pay the claim.
What happens if you do not have assets? They could garnish your wages, and a portion of your salary will go to the other party with each paycheck.
Can you afford to give up 30% of your wages to someone else?
Then if we look at part 2 of the definition of full coverage, maximum deductibles for comprehensive or collision coverage.
Could you afford to pay $5000 or $10000 if your vehicle were stolen or damaged in an accident? Most likely not, at that point does it even make sense to have coverage?
So even though, you may have full coverage if the deductibles are too high that you could not afford to pay them if your vehicle is damaged how are you going to get your vehicle repaired. Even though the insurance company would pay the difference between the cost of the repair and the deductible, the body shop is not going to allow you to pick up your vehicle till the deductible is paid.
How long would it take you to come up with $10,000 deductible to pay your deductible?
Notice, that there is nothing in this common definition of full coverage, about towing or rental reimbursement.
So, what happens if you need to rent a car at $40 a day while your vehicle is being repaired from an accident. Your full coverage may not be providing this protection.
Do you have the right coverage for your needs?
Do not let yourself believe that just because someone told you that you have full coverage, that you have the coverage that you need for your vehicle.
Make sure that you are reviewing your liability coverage to be sure that that coverage limit is adequate to handle claims. You do not want to be in a position where you have to sell your assets or have your wages garnished.
Make sure that the deductibles chosen for comprehensive and collision are reasonable and that you can afford them in the event of a claim.
Confirm if towing and rental reimbursement are included in your coverage.
Do not let yourself believe that your full coverage is all the protection you need.
Contact us here at Huff Insurance to discuss what coverage options you need to protect yourself in the event of an accident.