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PLPD (AKA Liability only) vs. "Full Coverage"

By Cover

Michigan Insurance agent selling auto insurance policy.
(Photo by Getty Images)

Shopping for car insurance isn’t as straightforward as it could be. If it’s your first time through the process, there’s a lot to figure out to make sure you’re getting the best deal.

However many times you have bought insurance, when it comes to getting the right policy, the more you know, the better. This means making sure you have the information you need to make the right insurance decisions.

So how much car insurance do you need? One of the first choices to make is deciding between full coverage Insurance vs. liability only (Formerly known as PLPD) insurance. Taking a closer look at both, you will see that the best option really depends on your circumstances.

What is liability insurance?

Liability Insurance exists to cover the potential cost of damage you may cause to others when driving. This could be the cost of medical care for people injured in an accident or the repair cost of damage to other vehicles.

In the majority of states having some form of liability coverage is the law.

There are three key numbers to look out for with liability insurance: coverage for injuries per person, total injury coverage per accident and coverage of property damage per accident.

For example, For the state of Michigan, the minimum requirements are $20,000 per person injured with a maximum of $40,000 for people injured in an accident and $10,000 property damage coverage. You will sometimes encounter the coverage level written in the format 20/40/10. (*We do not write 20/40/10 as it does not properly protect you in the event of an accident. Liability is not expensive, so make sure you protect yourself correctly.)

What is full coverage?

Despite the name, don’t go thinking that if you have full coverage, you are insured for any eventuality. Generally, when people say full coverage, they are referring to having Liability, collision, and comprehensive coverage.

The two parts that account for damage to your vehicle are Collision and Comprehensive Insurance. Collision insurance is generally for damage from situations when you are driving. This means things like a collision with another car, driving off the road, or hitting an object.

Comprehensive (AKA, Other than collision coverage) covers damage to the vehicle outside of driving situations, so for example, weather damage, fire or theft, vandalism.

The difference between comprehensive and collision is the difference between the damage caused by a tree falling on your car (comprehensive), and the damage caused if you drove into a tree (collision).

Liability vs. "full coverage"

The difference between liability and full coverage is straightforward. Liability insures against the damage you could cause other people or their property while on the road. Full coverage applies to damage to your vehicle. *Having just liability coverage and no collision or comprehensive coverage is what many people know as PLPD.

Liability coverage is a legal requirement in almost every state.

Do I need full coverage?

Is full coverage worth it? That depends. Probably the biggest factor to consider is the age of your vehicle.

Cars begin to lose their value almost right away.  Edmunds data suggests a new car loses around 10% of its value the moment you leave the lot.  Over five years your vehicle will depreciate by 15%-25% every year.

This drop in value means that the amount you first paid for your car will likely be more than what the insurance company will pay out should it get severely damaged.

Deciding whether full coverage makes sense is just a question of math. Ask yourself if the age, mileage, or wear and tear on your vehicle means that the payment you would get from your insurer is worth the extra monthly payments for full coverage.

Generally, if a vehicle is getting close to ten years old, you might be better saving the money you would spend on full coverage to put towards being able to repair or replace the car yourself. on the flip side, if you're not in a situation to just up and buy a new car if something where to happen, then it may be worth keeping collision coverage on an older vehicle for you.

What isn’t covered by full coverage?

Even if you have full coverage, there might be situations where you are not insured. For example, if you are hit by a driver with no insurance, or not enough liability coverage,  then uninsured and under-insured motorist coverage would take care of this. (*We always include this, but some places may "save" you a few dollars by not including this.)

If you want the peace of mind of knowing that you’ll have a vehicle should yours go in for repairs, then you should look at rental reimbursement coverage. This will help with the cost of a rental car while your car is out of action.

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