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If you buy an automobile, the law requires you to have insurance for that vehicle. Explain...

If you buy an automobile, the law requires you to have insurance for that vehicle. Explain the difference between liability auto insurance and full coverage auto insurance. Which insurance would you select for a new car? Why?

Solutions

Expert Solution

It is mandatory for a vehicle to have an auto insurance by law. The difference between liability auto insurance and full coverage auto insurance is-

  • Liability auto insurance only covers the damages caused to any thirtd party by you vehicle. It does not cover any damage caused to your own vehicle in case of an accident/ theft.
  • There is not policy known as full coverage auto insurance. Actually, it means a combination of insurances taken to cover all aspects of damges to the car, driver, and any third party. It almost covers all claims in case of unforeseeable event.

For a new car, you should select a full coverage insurance. As the car is new, there are chances of it getting damaged and dropping in value. Also, it will cause huge cash outflow to repair the vehicle as you cannot buy a new one currently. Hence, it is advisable to select a full coverange/ combination insurance for a new car.

Let me Leow in the comment section in case of any doubt.

jeff jeffy answered 1 year ago
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