Whenever someone mentions the term "full coverage," you may not notice, but every insurance person is cringing on the inside. Why? Because there is no such thing. You could purchase every kind of coverage a provider offers, and there would still be some scenario that might leave you uncovered or footing part of the bill.
Maybe we're being too literal here, and everyone knows full coverage doesn't actually cover everything, but c'mon, we're insurance people. Our job is built on reducing risk and we're not about to be reckless in a definition. Let us explain.
If it doesn't exist, why is term full coverage even a thing?
We're not sure where the term originated, but you better believe if we did, someone would be getting a lecture in Say semantics. Basically, people are referring to Collision and Comprehensive coverage as "full coverage". Since states already require you to have some sort of Bodily Injury and Property Damage liability insurance, you are already looking out for the medical or repair costs for any drivers or property you may hit. With Collision and Comprehensive coverage, you're protecting your vehicle. (Check out our explanations for different coverage types if you need a refresher.)
Having coverage for the other drivers and yourself sounds like you're covering all of your bases, potentially warranting the term "full coverage," but spoiler alert: We already told you it isn't complete and the term is terrible.
Let's start with liability limits.
Unless you're in New Hampshire, every driver is required to have at least the state required limit of Bodily Injury and Property Damage coverage. In Illinois, Bodily Injury limits are $25,000 per person, $50,000 per accident. According to the Insurance Information Institute, the average cost of a Bodily Injury claim in 2015 was $17,024. Sure, with Illinois limits, you'd be covered, but what if that was just one car, and you happened to hit two? And the second had multiple passengers? Your limits could be exceeded quickly, and you'd be left covering the costs.
Luckily if you were in Illinois, you'd be in a state with relatively high minimum requirements. Consider Florida drivers who are only required to carry Bodily Injury limits of $10,000 per person, $20,000 per accident. With a $17,024 average cost, a driver could be left footing a $7,000 bill if there was only one person in the other car!
Okay, so what coverage is full coverage missing?
Let's just run through some coverage options "full coverage" doesn't include.
- Medical Payments Coverage: With "full coverage," you've got coverage for the other driver's medical costs, their vehicle/property and your vehicle. What about your medical costs? Sure, you may have health insurance, but what happens if you reach your limits? MedPay can help pay for the medical costs of you and your passengers after an accident.
- Uninsured or Underinsured Motorists Coverage: You may have your bases covered, but if a driver hits you and doesn't have insurance, or enough insurance to cover the costs, you may be stuck footing the bill.
- Roadside Assistance Coverage: We include up to $100 of free roadside assistance per occurrence in every Say policy, but not all insurance providers do. Which means you can't expect your "full coverage" to cover your towing, lockout services or emergency gas fill expenses.
- Rental Car Coverage: You may be fully covered for a vehicle repair, but left without a ride while your car is in the shop. Rental Car coverage can fill the gap.
Got it, what else is missing?
Full coverage protects your vehicle, but let's consider some scenarios with specific parts of the car.
- Tires: Tires are not always covered by auto insurance (and we highly recommend you check the wording of your policy to see if yours are). For instance, if you run over a nail and pop your tire your insurance probably isn't going to pay for the repair. However, if your tires are vandalized or damaged by a fire, you should be covered by your Comprehensive coverage. "Should be" is the key phrase here because it really does depend on the wording of your insurance provider.
- Aftermarket parts or customization: Say you purchase a car and decide to give it a new paint job. Then unfortunately, you end up side-swiping a pole. Your new paint job may not be covered, or if it is, it may only be up to a certain limit. It is the same with any aftermarket parts (a.k.a. parts that did not come with the vehicle originally) like a custom sound system. At Say, with Comprehensive or Collision, we cover certain aftermarket parts and customization, but with a limit of $5,000. Like the tires, each provider is different.
TL;DR Version please?
We despise the term "full coverage" because a coverage that covers everything doesn't exist. Whether it's policy wording, gaps in coverage or certain scenarios that are just too tricky to guarantee, "full coverage" is a misnomer that needs to be corrected.
Posted March 7, 2017 in insurance know-how.