Should I get liability or full coverage auto insurance? What’s the difference?

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Asked October 22, 2015

1 Answer

New Jersey is fairly unique in that it allows for a basic coverage policy of auto insurance to be both legal and to be made available to drivers in the Garden State. While the state does not officially recommend such a basic policy, it is provided to help especially younger drivers just starting their working and earning years, since they simply can not afford full coverage auto insurance. This basic insurance policy is only really recommended for those individuals who have little in the way of assets and limited family commitments and responsibilities. These are important considerations when a person is buying auto insurance coverage, as it can make a real difference to an at-fault driver's financial future in the unfortunate event of an accident.

Differences Between Liability and Full Coverage Insurance

It is necessary to understand the concepts of liability and full coverage properly before a person can make the choice of which auto insurance coverage to select. Liability and full coverage are actually totally opposite ends of the spectrum of car insurance. To make matters more complicated, steps in between the two polar opposites exist, and even a wide variety of levels of liability or full coverage are out there. The good news is that if only the differences between just liability and full coverage are grasped, car insurance choices make sense.

Simply put, liability coverage is a form of auto insurance provision that takes care of the damage inflicted on another party and their property. Liability is expressed in the form of typically three numbers by the majority of insurance companies and individual state minimum requirement levels. If a state had a minimum of 15/30/5, this would mean that the highest amount the insurance will cover for single other person injuries is $15,000 per individual. The second number, 30 in this example, relates to the greatest amount the insurance will pay out for the total injuries sustained by the other vehicle occupants in the accident, or $30,000 for all of the other automobile's occupants. The third number, or 5 here, would refer to the maximum dollar amount an insurance outfit will pay out for property damage in a single accident ($5,000).

Full Coverage auto insurance includes liability coverage as well as collision and comprehensive coverage in addition. Collision coverage is exactly what it sounds like--- insurance that pays for damage to the policy owner's car in the event of an accident. This is optional unless the car owner owes money on the car, in which case the finance company or bank will likely require full insurance coverage to protect their investment.

Comprehensive coverage is also known as OTC, the "other than collision" form of coverage. This type of coverage protects a vehicle from damages that result from something besides a car crash or collision. This would protect against weather damage, fire, or theft. While drivers can decide to take comprehensive coverage without adopting collision, they may not choose collision coverage without taking on comprehensive coverage.

New Jersey's Individual State Requirements for Liability versus Full Coverage

Because New Jersey law allows for the Basic Policy minimum, it does not require insurance to be liable to any lawsuits in any accidents that arise where drivers are carrying the minimum necessary coverage. The basic policy includes all of the following minimums of coverage:

  • Bodily Injury: no coverage, up to $10,000 for every person in a single accident is an upgrade option
  • Property Damage Liability: $5,000 coverage
  • Personal Injury Protection: $15,000 per person each accident
  • Uninsured/Underinsured Motorist: none
  • Collision Coverage: None, available as an upgrade
  • Comprehensive Protection: None, available as an upgrade

Read more about New Jersey Car Insurance Requirements on this site or you can visit NJ's Department of Banking & Insurance site.  You may also want to discuss your options in more detail with a licensed insurance agent in NJ.


Answered October 27, 2015 by Njcoverage

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