What is Full Coverage Insurance?

If you’ve ever bought or leased a car, there’s a pretty good chance you’ve been told you need “full coverage” auto insurance while under a loan or lease. But what exactly does that mean?

Honestly, there is no such thing. It is not a term generally used by insurance companies because no insurance company can cover 100% of all situations, which is why so many companies do not use the term “full coverage.” The definition of full coverage will vary largely by the person and the situation.

What does “full coverage” actually mean?

The answer to this question lies in who is asking. A lender will have a very different idea of “full coverage” than the owner of the policy, and both may vary from state-mandated coverage. As we noted above, the definition is open to interpretation; however, let’s take a bit of a deeper look at each perspective:

State Regulations. Many states require a certain amount of insurance to be purchased in order to legally drive within the state (usually referred to as state minimum coverage). The standard coverages most states require are:

Liability Coverage. This coverage is designed to protect you if you’re found to be at fault in an accident. It can cover the other driver’s medical costs, lost wages, pain and suffering, repair or replacement of vehicle or property, and can even cover some legal bills. This coverage does not cover your medical expenses, lost wages, or vehicle damages.
Uninsured or Underinsured Motorist Coverage. This coverage requirement varies by state but is used when you’re in an accident caused by another driver who is either uninsured or does not have enough coverage.
Personal Injury Protection. This coverage can have different names depending on the state and is also not required by all states, but many do. It’s meant to help cover you and your passengers’ medical bills sustained during an accident.

Lenders and Financial Institutions. Lenders have a vested financial interest in the vehicle for which they issue a lease or loan. So, when they talk about full coverage, they want to make sure the vehicle is protected in the event of an accident. These coverages are optional if you own your vehicle. However, lenders often require the:

Collision Coverage. This coverage protects your vehicle (minus your deductible and up to market value) in the event of a collision with another vehicle or an object such as a barrier or tree.
Comprehensive Coverage. This covers your vehicle (minus your deductible and up to market value again) in the event of an accident that is not related to a collision, for example, a deer running out in front of you, a tree falling on your car, or a windshield crack.

Policyholders. No one wants more out of their insurance than the one who uses the vehicle every day. So, when you personally say full coverage, you may also be thinking of higher liability limits on top of a wide list of additional coverages offered, such as:

Rental Car Coverage.1 After an accident, there is nothing more inconvenient than being without your vehicle. This coverage, technically named Transportation Expenses, is designed to ensure you receive a rental car to keep you on the road while your car is being repaired.
Roadside Service.2 From lockouts, flat tires, and dead batteries to run out of gas, even the most perfectly maintained cars may have an unexpected breakdown that leaves you stranded on the roadside. This helps cover the expense of retrieving you and your vehicle in these situations.
Auto Security.3 This is an auto endorsement that ensures you have adequate coverage to replace your new ride should it end up totaled. With this endorsement, if your new car (less than two years old) is totaled, it will be replaced with the newest model year. If your vehicle is older than two years, it will be replaced with a model up to two years newer than your current model.

How Do I Know What Type of Coverage I Need?

The best way to make sure you have enough coverage for your specific needs and stay within your budget is to reach out to your local insurance agent. Since they’re local, they understand the demands of your area. They’re also experts in the insurance world, so they can make sure you meet any requirements from both the state and a lender while also ensuring you have peace of mind and that you’ll be covered.

ERIE® insurance products and services are provided by one or more of the following insurers: Erie Insurance Exchange, Erie Insurance Company, Erie Insurance Property & Casualty Company, Flagship City Insurance Company and Erie Family Life Insurance Company (home offices: Erie, Pennsylvania) or Erie Insurance Company of New York (home office: Rochester, New York).  The companies within the Erie Insurance Group are not licensed to operate in all states. Refer to the company licensure and states of operation information.

The insurance products and rates, if applicable, described in this blog are in effect as of January 2024 and may be changed at any time. 

Insurance products are subject to terms, conditions and exclusions not described in this blog. The policy contains the specific details of the coverages, terms, conditions and exclusions. 

The insurance products and services described in this blog are not offered in all states.  ERIE life insurance and annuity products are not available in New York.  ERIE Medicare supplement products are not available in the District of Columbia or New York.  ERIE long term care products are not available in the District of Columbia and New York. 

Eligibility will be determined at the time of application based upon applicable underwriting guidelines and rules in effect at that time.

Your ERIE agent can offer you practical guidance and answer questions you may have before you buy.