Potential Client: Yeah hello I have full coverage car insurance with my current company, and I would like a quote for full coverage with you to see if I can save money.

Me: Great! What coverages are you carrying with your current company?

Potential Client: I dont really know, but I think it is the state minimums

I get this exact phone call or ones similar to it in my agency at least 3 4 times each week.

When I receive these calls, I will usually ask what the person is trying to accomplish by getting full coverage. So far, I have found most believe if they are carrying the state minimum coverages, they are fully covered. Additionally, I have found that there are two major categories people fall into when they say full coverage:

Category 1 If I have an accident, any accident, I walk away without any financial consequences at all. I am totally covered no matter what happens.

Category 2 If somebody hits me and they do not have any insurance or if they do not have enough insurance, I will be covered for any conceivable expense to myself, my passengers, or my property as a result of their mistake.

Category 1 - I want to be covered no matter what happens

In order to answer this type of request, we must first understand that car insurance works with defined policy limits it is helpful to understand what the numbers we see mean in the policy we purchase.

For example, in Texas, the State minimum required coverage to demonstrate financial responsibility is 20/40/15. We have all seen these numbers over and over again, but you would be surprised how many people have no idea what they mean.

Each number is in thousands and is the maximum coverage you would receive so 20 means up to $20,000, 40 means up to $40,000, and 15 means up to $15,000. The first number is per person per accident bodily injury number in thousands. The second number is the total bodily injury per accident and the last number is the amount of property damage covered.

Our agency, through the insurance company I am appointed with offers the following levels of bodily injury liability auto coverages for non-commercial personal auto:

20/40

25/50

50/100

100/200

100/300

250/500

500/500

And the following property damage liability auto limits:

15

20

25

40

50

100

Keeping these numbers in mind Lets say you are carrying the Texas state minimums of 20/40/15 and that you cause an accident with $10,000 in bodily injury and $18,000 of property damage to a vehicle.

Based on your coverages, your insurance company would pay all of the bodily injury and up to $15,000 for the property damage, you would be responsible for $3,000.

Did you have full coverage?

Lets take it to the next level with a bad accident (but definitely not the worst) You cause an accident involving 3 other vehicles besides your own, and there are 2 people in each vehicle. We will use the same numbers as above.

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

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

Again, if you are carrying the same coverages as listed above, 4 of the 6 people would be covered by your state minimum policy because everybody was under the $20,000 per person limit, but you maxed out your per accident bodily injury at $40,000, so you would need to take care of $20,000 of bodily injury on your own.

Next, your property damage coverage would pay for $15,000 leaving the remaining $39,000 to you. The total bill to you would be $59,000

Did you have full coverage?

In order for you to be covered for this accident, as stated if there is no continued litigation or lawsuits, you would need to be carrying a minimum of a 50/100/100 policy. However, if there was continued litigation or if somebody had died as a result of the accident, you might find yourself needing even more coverage than the 500/500/100 policy would provide.

Bottom line Depending on the severity of the accident, Full Coverage under Category #1 is Fantasy.

In my next article we will discuss Category #2 Uninsured / Underinsured Motorist Full Coverage Fact or Fantasy?