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Debating Full Coverage Auto Insurance

Debating full coverage auto insurance is an ongoing exercise in agencies and living rooms all across the country. Every situation is different, and every auto insurance customer has different needs when it comes to coverage needs. Having a full coverage auto policy is great when you have a car you wish to protect to the maximum level. But it is not the right insurance option for every car or every driver. There are certain situations where this kind of investment is really not justified by the level of protection it provides. Any useful debate of full coverage auto policies has to start with an examination of what such protection includes; move to a discussion of examples when such protection are appropriate for a policy holder; and finally, the sharing of some cases when it may not be so appropriate to put that much money into your auto insurance investment.

What Full Auto Coverage Means

To begin with, it is useful and quite informative to start out with a simple explanation of what constitutes full coverage auto insurance in the first place. There is no universal denotative definition, and there is some flexibility in its meaning. In any case, drivers who have full coverage always have liability, collision and comprehensive insurance on their vehicles. These three areas of insurance form the foundation of protection upon which any other additional areas might be added.

In virtually every state, all drivers have to carry auto liability policies according to state law. Each state has different requirements for the forms of liability utilized and the levels mandated, so a liability policy in one state might look different than one in the state next door. With that being said, every full coverage auto policy must contain sufficient liability protection to satisfy the driver's home state requirements for liability.

Comprehensive and collision are not required by state law, but they are typically mandated by lien holders on financed or leased vehicles. It is no coincidence that many vehicles with so called full coverage are leased or financed vehicles. Collision and comprehensive each protect the lien holder's interests in the vehicle while the loan or lease is being paid off. In the meantime, they also protect your investment as well, because if you get into an accident and the vehicle is damaged or totaled, you are reimbursed up to its cash value, less deductible. This can really help you out when you still owe on a car, because you are responsible for paying a car off even after it has been totaled.

In some people's estimation, full coverage goes even further than just including the three above mentioned areas of protection. Some in the industry would include uninsured and underinsured motorist protection in that category. And in fact, there are some states which actually require these modes of protection. So for our purposes, we will expand our notion to include any and all areas of insurance protection required by laws of the state in which you reside.

Still, this does not cover the full gamut of definitions. Some industry experts and even some drivers see a full coverage policy as one that includes every available mode of coverage, whether elective or required. And in a strict literal sense, this comes off as very logical. In any case, when you have this kind of auto policy, you are investing a substantial amount of money into your personal auto premium, and expecting a large and expansive measure of protection in return.

Full Coverage Offers Great Protection

This protection laden approach to auto policies offers tremendous reach and can give policy holders peace of mind whenever a claim situation might arise. With an auto plan that's comprehensive and all encompassing, you are very likely to be able to meet any serious claim event with a confident and sure response knowing you are fully covered and you have no worry about how you are going to come up with the money to deal with the situation. There is very high value in this level of auto insurance protection. That peace of mind and that assurance of knowing you're covered are the very essence of auto insurance as a protective concept. Insuring a vehicle is not just supposed to ensure that it is covered; it's also supposed to ascertain your own peace of mind in that knowledge of being covered and of not having to worry. This peace is worth a pretty penny to a lot of drivers.

But it is just that pretty penny that makes insuring an automobile to the fullest extent so debatable. In contrast to a simple liability policy, you might expect to pay several times the premium to take your policy to the highest level available and accept all available elective endorsements. A policy of this stature has a lot of value in many cases, but its value tends to diminish as the vehicle being insured ages and depreciates in value. At some point, usually not long after a car is paid off, the policy holder needs to start thinking about whether to continue paying these sorts of prices for such a comprehensive plan.

Not Appropriate for Every Car

There is no clear answer as to when is the right time to cut back on your car policy and only carry liability and whatever else is required by your home state, but that conversation should start as soon as you own your car free and clear. And it should continue every six months or so until you finally come to a place where you are ready to make the move and reduce the extent of your plan. Full coverage is great, and it offers tremendous value for newer cars and for cars that are worth some money. But it is not appropriate for every car, or for every driver. One rule of thumb offered by some in the industry is that vehicles more than four or five years old are usually not worth carrying comprehensive and collision on. Another rule states that as a car owner and auto policy holder, you should not spend more than ten percent of your car's cash value on your collision policy. Once the value of your car drops below ten times your premium, according to this school of thought, it is time to drop that portion of your plan.

Some car owners take comfort in formulas and numbers, but others are more inclined to go by feel. They get a sense of when it is time to start cutting back on their insurance plan, and they just do it when that time comes. This is not a moment arrived at lightly for any of us, but there is logic to it, both in the money you save and in the inarguable notion that the protection you are paying for is becoming less worthwhile all the time as your car depreciates.

Protecting a new car to the greatest extent possible is a wise investment, because if anything goes wrong while you are still paying for it, you can pay for the damage without bankrupting yourself. Debating full coverage starts as soon as a vehicle is paid off.


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