Full Coverage Car Insurance – Fact or Fantasy?

Me: “Good afternoon, how can I help you today?”

Potential Client: “Yeah, hello – I have full-coverage car insurance with my current provider. I would like to get a quote from you for full coverage so I can see if I could save money on my auto insurance.”

Me: “Great! Me: “Great!

Potential Client: “I don’t really know but I believe it to be the state minimums.”

This exact phone call, or similar calls to it, is received at my agency at least three to four times per week.

I usually get these calls and ask the caller what they are trying to achieve by getting “full coverage”. Most people believe that if they have the minimum coverages they are covered, then they are fully protected. I’ve also found two main categories of people who say they want cheap car insurance and have full coverage.

Category 1 I am completely covered for any type of accident. No matter what, I am completely covered.

Category 2 If someone hits me, and they don’t have insurance, or lack enough insurance, they will cover any expense that they cause to me, my passengers or my property.

Category 1: I want to be covered regardless of what brings up

To answer this type question, it is important to first understand that car insurance has defined policy limits. It is also helpful to understand the meaning of the numbers in the policy.

In Texas, for example, the minimum coverage required by the state to prove financial responsibility is 20/40/15. These numbers are familiar to us all, but many people don’t know what they mean.

Each number is in thousands. It is the maximum coverage that you would get. So 20 means up $20,000, 40 means $40,000 and 15 means up $15,000. The first number represents the per-accident bodily injury number in thousands. The second number represents the total bodily injury per incident and the final number is the property damage.

Through the insurance company that I am appointed with, our agency offers the following levels in bodily injury liability auto coverages:

  • 20/40
  • 25/50
  • 50/100
  • 100/200
  • 100/300
  • 250/500
  • 500/500

The following property damage liability auto limits are available:

  • 15
  • 20
  • 25
  • 40
  • 50
  • 100

These numbers are important to remember: Let’s assume you have the Texas state minimums 20/40/15. If you cause an accident that results in $10,000 in bodily injury or $18,000 in property damage to a car, you will be charged with the Texas state minimums.

Your coverages would allow your insurance company to pay for all bodily injury and property damage up to $15,000, but you would have to pay $3,000.

Do you have complete coverage?

Let’s go one step further. You cause an accident that involves 3 vehicles other than your own vehicle. There are 2 people in each car. The same numbers will be used as before.

6 people x $10,000 = $60,000

3 vehicles x $18,000 = $54,000

If you have the same coverages, then 4 of the 6 would be covered by your state’s minimum policy. However, you had maxed your bodily injury per accident at $40,000 so you would need $20,000 to cover bodily injuries.

The next step is to have your property damage coverage pay $15,000 and leave the $39,000 remainder up to you. $59,000 would total your bill.

Do you have complete coverage?

You must have a minimum 50/100/100 insurance policy to be covered in this case. You might need more coverage if you were involved in ongoing litigation or if someone has died from the accident.

Bottom line: Full coverage under Category 1 is fantasy, depending on the severity of an accident.