What Is Liability-Only Car Insurance?
Liability-only insurance is the minimum legal coverage required in most states. It pays for damage and injuries you cause to other people in an accident where you're at fault — but it doesn't cover damage to your own vehicle.
Liability insurance has two main components:
Bodily injury liability covers medical bills, lost wages, and legal costs if you injure someone in an accident. It's typically expressed as two numbers, like 50/100 (meaning $50,000 per person, $100,000 per accident).
Property damage liability covers damage you cause to someone else's vehicle, fence, building, or other property. Common limits are $25,000, $50,000, or $100,000.
State minimum liability limits vary widely. California requires 15/30/5 ($15K per person, $30K per accident, $5K property damage), while Alaska requires 50/100/25. These minimums are often too low to cover serious accidents.
Important: If you cause an accident that exceeds your liability limits, you're personally responsible for the difference. That's why many experts recommend carrying at least 100/300/100 in liability coverage, even if your state requires less.
What Is Full Coverage Car Insurance?
"Full coverage" isn't an official insurance term — it's industry shorthand for a policy that includes liability plus collision and comprehensive. These additional coverages protect your vehicle, not just others'.
Here's what full coverage typically includes:
Collision coverage pays to repair or replace your car after an accident, regardless of who's at fault. If you hit another car, a tree, or flip your vehicle, collision covers the damage to your car (minus your deductible).
Comprehensive coverage (sometimes called "other than collision") covers non-accident damage: theft, vandalism, fire, flood, hail, hitting an animal, falling objects, and other perils. It also has a deductible.
Liability coverage is still included — full coverage builds on top of the state-required minimums.
If you're financing or leasing your vehicle, your lender will require full coverage to protect their financial interest in the car. Once you own the car outright, the decision to keep full coverage is yours.
What "full coverage" doesn't include: Despite the name, it doesn't cover medical payments (MedPay), uninsured/underinsured motorist coverage, rental reimbursement, roadside assistance, or gap insurance. Those are optional add-ons.
How Much Does Each Cost?
The national average cost of full coverage car insurance is $2,158 per year in 2026, while liability-only policies average $622 per year. That means full coverage costs about $1,536 more annually — or roughly $128 per month extra.
However, your actual cost depends heavily on your state, age, driving record, credit score, and vehicle. Some examples:
By state: In Michigan (historically the most expensive state), full coverage averages $3,600+/year. In Maine or Idaho, it's closer to $1,400/year. Liability-only ranges from under $400 in rural states to over $1,000 in urban areas with high injury costs.
By age: Young drivers (16-25) pay significantly more for both types, especially full coverage. A 20-year-old might pay $4,000+/year for full coverage vs. $1,500 for liability-only. Rates drop sharply after age 25.
By vehicle: Expensive, high-performance, or theft-prone cars cost more to insure with full coverage. A 2024 Honda Civic might cost $1,800/year for full coverage, while a 2024 BMW M3 could be $4,000+.
By deductible: Choosing a $1,000 deductible instead of $500 reduces collision and comprehensive premiums by 20-30%, making full coverage more affordable.
Full Coverage vs Liability: Side-by-Side Comparison
Here's a quick reference to help you understand the key differences:
What's covered:
Liability-only: Damage/injuries you cause to others. Full coverage: Damage/injuries you cause to others, plus damage to your own car from accidents, theft, vandalism, weather, and other perils.
Your car is totaled in an at-fault accident:
Liability-only: You get $0. Full coverage: You get the actual cash value minus your deductible.
Your car is stolen:
Liability-only: You get $0. Full coverage: Comprehensive pays the actual cash value minus deductible.
Hail damages your car:
Liability-only: You get $0. Full coverage: Comprehensive covers repair or replacement minus deductible.
Someone else hits you (they're at fault):
Liability-only: Their insurance should pay. If they're uninsured, you pay out of pocket (unless you have uninsured motorist property damage). Full coverage: Collision pays for your repairs immediately; your insurer seeks reimbursement from the at-fault driver.
Best for:
Liability-only: Older cars (value under $3K-$4K), drivers with large emergency funds, beater/spare vehicles. Full coverage: Newer cars, financed/leased vehicles, cars you can't afford to replace out-of-pocket.
When Liability-Only Makes Sense
Liability-only insurance can save you over $1,500 per year, but it leaves you vulnerable if your car is damaged or stolen. Consider liability-only if:
- Your car is worth less than $3,000-$4,000
- Your annual collision + comprehensive premium exceeds 10% of the car's value
- You have enough savings to replace the car out-of-pocket if needed
- You own the car outright (no loan or lease)
- The car is a spare vehicle or you have reliable transportation alternatives
- You're comfortable with the risk of paying for your own repairs
Example: You own a 2012 Honda Accord worth $3,500. Full coverage costs $1,400/year with a $1,000 deductible. If the car is totaled, you'd receive around $2,500 ($3,500 minus deductible). Over three years, you'd pay $4,200 in premiums to protect a car worth $3,500. In this scenario, liability-only and self-insuring may make more financial sense.
Rule of thumb: When your annual collision and comprehensive premiums equal or exceed 10% of your car's value, it's time to consider dropping to liability-only.
When Full Coverage Is Worth It
Full coverage is almost always the right choice if:
- You're financing or leasing the vehicle (it's required)
- Your car is worth more than $5,000
- You couldn't afford to replace the car out-of-pocket
- You live in an area with high theft, hail, or flood risk
- You have a newer car (less than 5-7 years old)
- You drive a high-value or specialty vehicle
Even if you own an older car outright, full coverage might still be worth it if you don't have a robust emergency fund. Losing your only transportation to theft or an accident can create serious financial hardship.
Example: You own a 2021 Toyota RAV4 worth $24,000. Full coverage costs $1,600/year. If the car is stolen or totaled, you'd receive around $23,000 (value minus $1,000 deductible) — far more than the annual premium. In this case, full coverage is a clear win.
Pro tip: You can reduce full coverage costs by raising your deductible to $1,000 or $1,500. Just make sure you can afford that deductible if you need to file a claim.
What Else Should You Consider?
Whether you choose full coverage or liability-only, consider adding these optional coverages:
Uninsured/underinsured motorist (UM/UIM): Protects you if you're hit by a driver with no insurance or insufficient coverage. Highly recommended — about 1 in 8 drivers is uninsured nationally, and rates are much higher in some states.
Medical payments (MedPay) or personal injury protection (PIP): Covers medical bills for you and your passengers regardless of fault. Especially important if you have high-deductible health insurance.
Rental reimbursement: Pays for a rental car while yours is being repaired after a covered claim. Usually costs $15-$30 per year.
Roadside assistance: Covers towing, jump-starts, flat tires, and lockouts. Often cheaper through your insurer than AAA.
Gap insurance: If you're financing a new car, gap insurance covers the difference between what you owe and what the car is worth if it's totaled. New cars depreciate quickly, so this is critical in the first few years.
How to Decide: A Simple Framework
Here's a step-by-step process to choose between full coverage and liability-only:
Step 1: Check your loan/lease requirements. If you're financing or leasing, full coverage is mandatory. Skip to pricing and discounts.
Step 2: Determine your car's actual cash value (ACV). Use Kelley Blue Book, Edmunds, or NADA Guides to get a realistic estimate. Be honest about condition.
Step 3: Get quotes for both coverage levels. Compare full coverage vs. liability-only from at least 3 carriers. Note the annual premium difference.
Step 4: Calculate the return on investment. Divide your car's ACV by the annual cost of collision + comprehensive (full coverage minus liability-only). If the result is less than 10 years, full coverage likely makes sense. If it's more than 10 years, consider liability-only.
Step 5: Assess your financial cushion. Could you replace or repair your car out-of-pocket tomorrow? If not, full coverage is safer. If yes, liability-only becomes more viable.
Step 6: Factor in risk. Do you live in a high-crime area? Is your car theft-prone? Do you live in a hail or flood zone? Are you a new or high-risk driver? Higher risk tips the scale toward full coverage.
Example calculation: Your car is worth $4,000. Full coverage is $1,200/year, liability-only is $500/year. The difference is $700/year for collision + comprehensive. $4,000 ÷ $700 = 5.7 years. Since it would take 5.7 years of premiums to equal the car's value, full coverage is on the borderline. Your decision hinges on your savings and risk tolerance.
Frequently Asked Questions
Full coverage is a term that typically refers to a policy that includes liability insurance plus collision and comprehensive coverage. It protects both damage you cause to others and damage to your own vehicle from accidents, theft, vandalism, and natural disasters.
Full coverage costs an average of $2,158 per year nationally in 2026, while liability-only policies average $622 per year. That's about $1,536 more per year for the additional protection. Your actual cost depends on your state, age, vehicle, driving record, and credit.
Consider switching when your car's value drops below $3,000-$4,000, or when your annual collision and comprehensive premiums exceed 10% of the car's value. Also consider your savings cushion and risk tolerance. If you can't afford to replace the car out-of-pocket, keep full coverage.
No. Despite the name, full coverage doesn't cover everything. It doesn't include medical payments, uninsured motorist coverage, rental reimbursement, or gap insurance unless you add them separately. It also won't cover mechanical breakdowns, normal wear and tear, or intentional damage.
Generally no. If you're financing or leasing, lenders require full coverage. Even if you own the car outright, liability-only leaves you unprotected if your newer vehicle is totaled or stolen — a significant financial loss. Full coverage is almost always worth it for cars worth more than $5,000.
Yes. You can mix coverage types on a multi-car policy. Many people keep full coverage on newer cars and liability-only on older vehicles. This is a smart way to balance protection and cost.