The Insurance Research Council predicts that one out of every six drivers in the U.S. are driving uninsured in 2010. Automobile insurance protects the insured against financial loss in the event of an accident. Generally divided into two sections, an automobile insurance policy provides liability coverage for the other party, required by law, and full coverage for your vehicle. While liability insurance can be purchased without full coverage, you can not purchase full coverage insurance with liability insurance.
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Liability insurance, paid to the other party when you are proven negligent in an accident, generally provides coverage for bodily injury, property damage, medical payments, or in some states personal injury protection, and uninsured/under-insured motorist. Liability coverage, unlike full coverage insurance, does not provide protection for your vehicle and provides very little protection for your bodily injury.
Full coverage insurance, often referred to as physical damage insurance, provides comprehensive and collision coverage for your vehicle.
Comprehensive coverage covers your vehicle for most things not covered under collision. This includes but is not limited to, damage caused by fire, hail, theft, vandalism and flood. Comprehensive coverage will also pay to repair your vehicle if you strike an animal or a falling object.
Collision coverage pays for damages to your vehicle when you collide with another object such as a tree, ditch, mailbox or even another vehicle.
Other coverages available under the full coverage section of your insurance policy include rental reimbursement and road side assistance.
Liability coverage limits the amount of money the insurance coverage will pay out if you are involved in an accident. Found on the declaration page of your insurance policy, liability limits are usually either a combined single limit, $300,000, or a split limit, $100,000/$300,000/$100,000. If your policy has a combined single limit that is the most the company will pay out for bodily injury and property damage. If your policy has split limits, such as $100,000/$300,000/$100,000, your company will pay a total of $100,000 per person for bodily injury up to $300,000 and in addition up to $100,000 in property damage.
Full coverage generally only pays the actual cash value to repair or replace the vehicle.
Premiums and Deductibles
Liability insurance does not require you to pay a deductible and because there is no coverage for your vehicle, costs significantly less than full coverage insurance. With full coverage insurance you must pay a deductible, an amount out of pocket generally $250 or $500, to repair or replace your vehicle and your premium is higher. The premium for full coverage insurance fluctuates dramatically depending upon what type of vehicle you insure, more expensive cars cost more to insure.
As of June 1st, 2010, according to the Wisconsin Commissioner of Insurance, Wisconsin drivers are required to have an automobile insurance policy in force. All other states already have auto insurance requirements. Visit the website for your department of insurance to review the specific requirements for your state.
Full coverage while not required by law if often required by the loss payee if there is a loan on the vehicle.