What is Full Coverage Auto Insurance?

Monday, January 22, 2018 - 7:00am
Two Hands holding bubble with car inside of bubble

"What is full coverage" is a question that I am very passionate about because it is both a trap for prospective consumers and a potential trap for insurance agents.  Technically speaking, there is no such thing as "full coverage."

The term originated back in the 1980's well before I became involved in insurance.  At the time it was a generic term that meant an individual had protection for their vehicle as well as liability insurance.  In other words, they carried comprehensive and collision insurance on their car.

People ask for "full coverage" for several reasons.  Primarily, they want to make sure that their car will be repaired if it is damaged, and auto loan/leasing companies require it.  However, the concept of comprehensive and collision coverage is confusing.  Therefore the term "full coverage" was used to specify the consumers' desires.

There are two significant problems with this situation though.  First, the consumer does not know what to ask for, because they do not understand comprehensive/collision coverage.  So they are buying a product that they assume is what they need.  They will not find out if they are right or not until it is too late.

The second problem is our litigious society.  From a legal standpoint "full coverage" means that the insured is protected from everything.  The insured is entirely covered for losses in an accident.  A fully insured policy would legally say that the insurance company would pay for any and every damage on your behalf that arises from an accident.

Unfortunately, insurance companies do not offer this kind of coverage.  They set limits on their coverages, and they put exclusions in the contract.  From a legal standpoint "full coverage" does not exist.  This can cause many issues with an agent who tells their client that he or she is "fully insured."

I will be honest with you.  When I ask someone what kind of coverage they wish to buy, and the client tells me they want "full coverage,"  all they are saying to me is that they do not fully understand the coverages available and how the coverages can satisfy their specific needs.  When this happens, we sit down and discuss coverages, and they almost always admit that they do not understand what comprehensive or collision means nor how a deductible works.  When I ask them why they told me they wanted "full coverage" they inform me that a friend or family member told them to ask for it.

In conclusion, this brings up a final concern.  Primarily, insureds who ask for "full coverage" are placing themselves in a position to potentially be buying a less than desirable policy from a less than reputable agent.  Then the insured ends up spending too much money on the coverage that doesn't meet their specific needs.  Instead, ask your agent to explain comprehensive and collision coverage.  Be sure to understand how they interact with each other.  Then make an informed decision.  An agent's job is to make sure you understand your coverage and make sure you have what you need.  You should not be afraid to ask them to explain any part of the policy.

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