Liability vs. full coverage auto insurance: What’s the difference?

As you shop around for car insurance, you’ll generally see the option to get either liability-only coverage or full coverage. So, which should you choose?

While liability insurance is the cheaper option, it covers only damage you cause to other people — it provides no actual coverage for your own vehicle. Full coverage, on the other hand, costs a bit more but helps pay to repair or replace your own car after accidents, theft, storms, or other covered events.

Here’s a closer look at how liability vs. full coverage auto insurance compare and how to decide which one makes the most sense.

Liability vs. full coverage: Key differences

The biggest difference between liability vs. full coverage auto insurance comes down to one question: Does your insurance only cover other drivers in an accident, or does it cover your car, too?

In short, while liability coverage helps you stay legal on the road (it’s the minimum car insurance required in most states), full coverage provides a much bigger financial safety net if replacing your car out of pocket would be difficult.

Here’s a quick side-by-side look at how liability vs. full coverage compare:

What is liability auto insurance?

Liability auto insurance helps pay for damage or injuries you cause to other people if you’re at fault in an accident. Since this type of insurance is required by law in most states, it’s generally the foundation of most car insurance policies.

Liability coverage usually includes two parts:

• Bodily injury liability: This helps cover things like medical bills, lost wages, and even legal fees if someone is injured in an accident you caused.
• Property damage liability: This can pay to repair or replace someone else’s car or other property (like a fence, mailbox, or garage door) that you damaged in an accident.

What liability doesn’t cover is your own car. For example, say you rear-end someone and carry only liability insurance. Your policy could help to pay for the other driver’s repairs, but you’d be responsible for fixing your own vehicle out of pocket.

This is the biggest tradeoff if you go the liability-only route. You’ll have lower monthly premiums but almost no financial protection for your actual vehicle.

Pros and cons of liability

Liability-only coverage can make sense if your car isn’t worth much or you could comfortably afford to replace it yourself. But if a major repair would create financial stress, then this kind of insurance might not be sufficient for your needs.

What is full coverage auto insurance?

Full coverage car insurance isn’t actually a specific type of policy. Rather, it’s a general term used to describe a policy that includes more than just the state minimum. In most cases, full coverage includes:

• Liability coverage for damage you cause to others.
• Collision coverage to help pay to repair or replace your car after an accident — such as if you hit another vehicle, back into a pole, or slide into a guardrail.
• Comprehensive coverage for non-collision damage, such as theft, vandalism, hail, flooding, or a tree falling on your car.

Together, these coverages protect both other people and your own vehicle.

This type of coverage is typically required by lenders if you lease or finance your car. But even if you own your car and aren’t required to have full coverage, it could be worth having if replacing your car out of pocket would be difficult.

Pros and cons of full coverage

Contrary to popular belief, full coverage doesn’t actually mean everything is covered. You might still need to add other coverages separately — like rental reimbursement, roadside assistance, gap insurance, or medical payments (MedPay) — depending on your policy.

Liability vs. full coverage: Which should you choose?

If you’re torn between liability vs. full coverage auto insurance, the right choice usually comes down to two things:

• How much is your car worth?
• How much financial risk are you comfortable taking on?

If your goal is simply to meet your state’s legal requirement and keep your monthly premium as low as possible, liability might be enough. But if you’d struggle to repair or replace your car after an accident, full coverage can provide a much bigger safety net.

Here’s a quick way to think about it:

When liability insurance is enough

Liability-only coverage could be a good fit if:

• Your car is older and has a low market value. If your car is worth only a few thousand dollars, for example, paying for collision and comprehensive coverage might not make financial sense.
• You can afford to replace your car yourself. If a major repair (or replacing your car entirely) wouldn’t cause financial strain, liability could be enough.
• You own your car outright. Once your loan is paid off, you’re no longer required by a lender to carry full coverage. In this case, you might decide to drop full coverage.
• Your main goal is to lower monthly costs. Liability-only insurance is almost always cheaper, which is helpful if your budget is tight. The key question to ask yourself is this: If your car were totaled tomorrow, would you be okay financially? If the answer is yes, liability might be enough.

When you should consider full coverage

Full coverage can make more sense when replacing your vehicle would be a real financial problem. For instance, you might want full coverage if:

• Your car is newer or expensive to repair. The more your car is worth, the more valuable collision and comprehensive coverage becomes.
• You have a loan or lease. Most lenders require full coverage on a loan or leased vehicle until the vehicle is paid off.
• You couldn’t easily afford a replacement. If paying for a totaled car out of pocket would derail your finances, full coverage is usually the better call.
• You live somewhere with higher risks. Areas with frequent hail, flooding, theft, or animal collisions can make comprehensive coverage especially valuable since these kinds of damages wouldn’t be covered by a liability-only policy.

Can you switch from full coverage to liability?

Yes, you can usually switch from full coverage to liability-only insurance. One caveat is if you have an auto loan or lease — in this case, you’d have to wait until it’s paid off and you own the car outright to make the change.

However, paying off a loan doesn’t automatically mean you should drop full coverage. Before making the switch, ask yourself:

• How much is my car actually worth today?
• Could I afford to repair or replace it out of pocket?
• Would saving on premiums be worth taking on that risk?

For some people, dropping full coverage makes perfect sense. For others, keeping the extra car insurance coverage is still worth the cost.

Find out: How much car insurance do I need?

State minimum vs. recommended coverage

Meeting your state’s minimum insurance requirement keeps you legal. But staying “street legal” doesn’t automatically equal being well protected.

For example, many states require fairly low liability limits, such as $25,000 for property damage or bodily injury. That might sound like plenty until you’re involved in a serious accident. Medical bills and vehicle repairs can add up fast, and if your coverage limit runs out, you could be responsible for paying the rest yourself.

This is why many insurance professionals recommend carrying higher liability limits than the legal minimum, even if you skip full coverage.

Liability vs. full coverage: Cost comparison example

One of the biggest reasons people choose liability over full coverage is price. Liability coverage costs $737 per year (or $61 per month), according to the latest data from the National Association of Insurance Commissioners (NAIC). In comparison, full coverage costs around $1,438 per year (or $120 per month). That’s a difference of about $59 per month, which adds up to more than $700 per year.

At first glance, liability can feel like the obvious choice. But the tradeoff is that if your car is stolen, totaled in an accident, or damaged in a hailstorm, liability won’t help pay to replace it. Full coverage, on the other hand, could.

For example, if your car is worth $18,000 and gets totaled, paying an extra $60-ish per month for full coverage could be much more affordable than trying to replace that car entirely out of pocket.

Learn more: Comprehensive vs. collision insurance