Liability-only vs. full coverage car insurance

Liability-only vs. full coverage car insurance costs

Carriers analyze many rating factors to determine your car insurance rate. In most states, these include your age, gender, driving history and even your credit history. The type of coverage you choose — liability-only or full coverage — also significantly impacts how much your premium will be.

A liability-only insurance policy pays for injuries or property damage you cause in an at-fault accident — up to the limits you carry on your policy. Full coverage (which usually includes comprehensive and collision coverage) offers financial protection for your vehicle in addition to the benefits of liability insurance. Generally, liability-only car insurance is significantly cheaper than full coverage since it provides less financial protection.

Cost by state

The state you live in significantly impacts your car insurance rates. Each state has its own car insurance regulations, crash statistics, weather patterns, crime rates and cost of living variations, which all impact the price of a car insurance policy. For example, a minimum coverage policy in Florida (as of November 2024) costs an average of $1,125 per year, while a minimum coverage policy in Maine averages just $416. These rate differences can be attributed, in part, to Florida's PIP coverage requirements, high number of uninsured drivers and frequent extreme weather conditions.

Cost by age

Younger drivers typically pay higher car insurance rates because they have less experience behind the wheel and are more likely to engage in risky driving behaviors. This is true for full and minimum coverage policies unless you live in Hawaii or Massachusetts, where age is banned as a car insurance rating factor (although carriers in Massachusetts can consider how many years you've been licensed for). Young drivers typically save money by remaining insured on their parents' policy and drivers under the age of 18 usually cannot purchase their own insurance policy.

Cost by gender

Women generally pay less for full coverage car insurance due to a lower likelihood of engaging in risky driving behaviors that could result in claims. However, California, Hawaii, Massachusetts, Michigan, North Carolina and Pennsylvania ban the use of gender as a rating factor. In these states, your gender should not affect your car insurance premium. 

Additionally, you may find that rates vary more widely based on other rating factors. A 24-year-old woman may pay more than a 40-year-old man since she has fewer years of driving experience. Or, a woman who lives in New York City could pay higher premiums than a man living in rural Iowa. Statistically, she may present a greater risk to her insurance company by living and driving in a highly congested area.

Cost by insurance company

Every car insurance carrier has its own proprietary method for setting rates, so your quoted rates will vary between providers. Finding the best car insurance company for your needs generally involves knowing what coverage amount best suits you, shopping around and comparing quotes. Below, we’ve included average premiums provided by analytics company Quadrant Information Services for some of the largest car insurance companies by market.

Liability-only vs. full coverage insurance

Simply put, liability-only car insurance is a type of policy that only provides coverage for injury and damages you cause to another vehicle or another person's property, not damage your car sustains. Full coverage, on the other hand, builds on liability-only and adds additional coverage, including coverage for damage to your vehicle from collisions as well as non-collision incidents such as storms and fires. In the U.S., the average cost of car insurance for minimum coverage — the lowest coverage level of insurance that you can purchase — is $678 per year, while full coverage costs an average of $2,458 per year.

Keep in mind, though, that your auto insurance needs will likely change over time. You may find that full coverage is the best option for you now, while in the future, you may be more apt to choose liability-only as the value of your vehicle decreases or your financial situation shifts. Reassessing your needs regularly, especially if you’ve recently gone through a life change, can help you align your coverage with your circumstances. Below, we delve deeper into the differences between liability-only and full coverage to help you determine which is best for you as you gather car insurance quotes.

Liability-only car insurance

Liability car insurance coverage is the part of your policy that pays for the injuries and damages you cause to someone else in an at-fault auto accident. Most states require drivers to carry at least a minimum car insurance coverage limit, often called “minimum coverage.” However, you can buy higher liability limits than required by your state and still have a “liability-only” policy.

Liability coverage is broken down into two parts:

• Bodily injury liability: This coverage pays for the injuries you cause to another party in an at-fault accident.
• Property damage liability: This portion of your liability coverage pays for the damages you cause to another’s property, such as another vehicle, a fence or a building.

Liability coverage is often listed as split limits in a "bodily injury per person / bodily injury per accident / property damage per accident" format. This means that your policy will cover up to different amounts for injuries to a single person, injuries to multiple parties from a single accident, and property damage from a single accident. However, your liability coverage may also be a “combined single limit,” meaning it’s one number that can be used flexibly to cover the damage and injuries you cause.

Some states also require other coverage types as part of their minimum coverage requirements, including:

• Personal injury protection (PIP): This coverage pays for your medical bills and your passengers’ medical bills if you are injured in an accident, regardless of fault. PIP may also pay for lost wages and the costs for household services you can’t perform due to injuries. In no-fault states, PIP is required.
• Uninsured and underinsured motorist: These two coverage types pay for injuries you sustain if you are hit by a driver who does not have insurance or does not have enough insurance to cover your bills. This also may provide coverage if you are a pedestrian hit by an uninsured motorist or a victim of a hit-and-run accident.
• Medical payments: Although only required in a few states, medical payments coverage is similar to PIP. It pays for your injuries and the injuries to your passengers regardless of fault. However, medical payments coverage does not cover lost wages or household services like PIP.

Takeaway: You must purchase a car insurance policy with at least your state’s minimum required coverage types and limits in states where car insurance is required. However, you can purchase higher liability limits and other coverage types, such as medical payments, and still have a “liability-only” policy.

Full coverage car insurance

Although there is no industry standard definition, full coverage car insurance usually refers to a policy that has all the state-required coverage types as well as comprehensive and collision coverage, which add coverage for damage to your vehicle. While it’s possible to have a full coverage policy with low liability limits, many full coverage policies have higher limits for liability coverage to offer more robust coverage and greater financial protection.

In addition to state minimum coverage requirements, full coverage policies typically include:

• Collision: This coverage pays for your vehicle’s damage from collisions, such as hitting another vehicle, tree or building. Collision coverage will help cover your vehicle’s repairs in a covered claim, regardless of fault.
• Comprehensive: Often called “other-than-collision” coverage, comprehensive pays for non-collision damage, such as damage caused by fire, theft, weather, vandalism or striking an animal.

You may also be able to add some additional coverage types, known as endorsements, to full coverage policies:

• Rental reimbursement: This coverage will pay for a rental car if your vehicle is not driveable and is being repaired or replaced by a claim covered under your comprehensive or collision coverage. There is generally a per-day coverage limit and a total maximum amount of coverage limit.
• Roadside assistance: This endorsement pays for service calls needed for your vehicle, like a tow, jump start or tire repair service.
• Gap insurance: Gap coverage is designed to pay the difference between your new car’s actual cash value and the amount you owe on a loan or lease. If your vehicle is totaled or stolen and you owe more than the car is worth, gap coverage pays the difference.

Takeaway: A full coverage policy is generally more expensive than a liability-only policy, but it provides more financial protection and often has higher liability limits. Full coverage is often required when a vehicle is financed or leased. Additionally, you must have full coverage to qualify for several common endorsements, including car rental reimbursement coverage and roadside assistance.

Do I need liability-only or full coverage car insurance?

Deciding how much car insurance you need is pivotal in finding the right policy for you. Too little coverage could leave you with high out-of-pocket bills in the event of an accident and cause financial hardship. Too much coverage, however, and your budget may be strained by your premium payment. So, how do you know how much coverage is right for you?

First, if you have a loan or lease on your vehicle, you’ll likely be required to buy full coverage as a condition of the financing, which could be an easy way to narrow down your options. If you own your vehicle outright, you can choose between liability-only and full coverage policies. If your vehicle is older (valued at less than the cost of a full coverage policy) or you otherwise feel that you have enough money to pay for damage out of pocket, you may want to choose liability-only. However, if paying for vehicle damage out of pocket would cause you and your family financial distress, full coverage may be the better option.

Even high-income individuals often choose a robust insurance policy over driving with liability-only coverage because the cost of a policy is nearly always less than the cost of replacing a vehicle.

Most insurance professionals recommend you consider buying higher liability coverage limits than your state’s minimum, even if you choose not to have comprehensive and collision coverage on your vehicle. Higher liability limits mean greater financial protection for you and your family in an at-fault accident. If you are unsure how to determine the right coverage amount, you always have the option of working with a licensed insurance agent for more guidance.

Frequently asked questions

Methodology

Bankrate utilizes Quadrant Information Services to analyze November 2024 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Rates are weighted based on the population density in each geographic region. Quoted rates are based on a single, 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:

• $100,000 bodily injury liability per person
• $300,000 bodily injury liability per accident
• $50,000 property damage liability per accident
• $100,000 uninsured motorist bodily injury per person
• $300,000 uninsured motorist bodily injury per accident
• $500 collision deductible
• $500 comprehensive deductible

To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2022 Toyota Camry, commute five days a week and drive 12,000 miles annually. 

These are sample rates and should only be used for comparative purposes. 

Age: Rates were calculated by evaluating our base profile with the ages 18-60 (base: 40 years) applied. Depending on age, drivers may be a renter or homeowner. Age is not a contributing rating factor in Hawaii and Massachusetts due to state regulations.

Teens: Rates were determined by adding a 16-year-old teen to their 40-year-old married parents' policy. The rates displayed reflect the total cost of a driver this age added to their parents’ policy. 

Gender: The following states do not use gender as a determining factor in calculating premiums: California, Hawaii, Massachusetts, Michigan, North Carolina, Pennsylvania.