How to decide based on your car value, loan status, and break-even math.
Updated 2026 The Most Common Insurance Question, Answered
One of the most common questions in auto insurance is whether to carry full coverage or just liability. The answer depends primarily on two things: the current market value of your vehicle and whether you have an outstanding loan or lease on it. Getting this decision wrong in either direction costs you money, either through unnecessary premiums or an uncovered loss you cannot afford.
Liability insurance is the foundation of every auto policy. Bodily injury liability pays for medical expenses, lost wages, and legal fees for people you injure in an accident you cause. Property damage liability pays to repair or replace other vehicles or property you damage. Liability does not cover your own vehicle or your own medical bills. Every state except New Hampshire requires minimum liability coverage to legally drive.
Full coverage is not a single policy type but a combination of coverages: your state-required liability, plus collision (pays to repair your vehicle after any accident regardless of fault), and comprehensive (covers non-collision losses such as theft, hail, flooding, and fire). Full coverage does not cover mechanical breakdowns or normal wear and tear.
| State | Liability/Month | Full Coverage/Month | Difference |
|---|---|---|---|
| Florida | $118 | $262 | $144 |
| California | $92 | $218 | $126 |
| Texas | $80 | $188 | $108 |
| Ohio | $48 | $108 | $60 |
| Vermont | $42 | $98 | $56 |
| National Average | $72 | $167 | $95 |
If you financed or leased your vehicle, full coverage is not optional. Your lender requires collision and comprehensive to protect their financial interest in the vehicle. Dropping full coverage violates your loan agreement and can trigger force-placed insurance, which is far more expensive and benefits only the lender.
If your car is paid off and worth less than $4,000 to $5,000, carrying full coverage may cost more than it could ever pay out. The general rule: if your annual full-coverage premium (above the cost of liability only) exceeds 10 percent of your vehicle value, liability-only is likely the better financial choice.
Example: your car is worth $8,000 and full coverage costs $120/month versus $55/month for liability only, a difference of $65/month ($780/year). With a $500 deductible, the max payout is $7,500. Dividing $7,500 by $780 gives roughly 9.6 years to break even. Run this calculation annually as your car depreciates.