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Auto Insurance in California: What You Should Know

Posted by attorney Jonathan Stein

In California, it is mandatory that all drivers have auto insurance. In fact, to register a car, you must either provide proof of insurance or have your insurer send it to the Department of Motor Vehicles (DMV) electronically. An insurance agent will offer you many different options when it comes to insurance, so you should know what you are going to buy before you see an agent.

  1. The most important coverage you can buy is uninsured/underinsured motorist. This coverage protects you if you are involved in a collision with an uninsured or underinsured driver. Despite the mandatory nature of automobile insurance, there are estimates that as many as 50 percent of Californians are uninsured. With the minimum amount of insurance required at only $15,000 per person, the number of uninsured and/or underinsured motorists may top 75 percent. It is important to buy as much of this coverage as you can afford because it pays for injuries you sustain in a collision.
  2. The second most important coverage is bodily injury. This coverage pays for injuries you cause in a collision. The minimum required amount is $15,000 per person and $30,000 per accident. However, with the state's low-cost auto insurance program, those numbers can be as low as $10,000 per person and $20,000 per accident. You should buy as much coverage as you can afford, and as the amount of coverage increases, the cost per $1,000 of coverage decreases significantly. Also, your bodily injury coverage is the maximum amount of uninsured motorist coverage you can have. Thus, by increasing your bodily injury coverage, you increase your available uninsured/underinsured motorist coverage.
  3. Medical payments, or "med pay," as it is commonly called, should also be on your policy. This coverage pays for medical bills you or your passengers incur as a result of a collision, regardless of who is at fault. So, even if you are at fault for a collision, med pay will pay all reasonable and necessary medical bills related to injuries you have from the collision. This coverage is amazingly inexpensive and very important to people who have no health insurance or may have a high-deductible health insurance policy.
  4. Collision coverage pays for the damage to your vehicle if you are involved in a collision, regardless of who is at fault. If you are financing a car, most financing agreements require that you have a $250 or $500 deductible. The higher your deductible, the lower your premium. So, if given a choice, you should opt for the highest deductible you can get. If you have a financed car, choose the $500 deductible. If you can afford a $1,000 deductible and your car is not financed, opt for that deductible. The money you save on insurance premiums will make up for the higher deductible.
  5. Comprehensive coverage pays for damage that is not collision related. A stolen car, slashed tires, or broken windows are examples of things paid for under comprehensive coverage. (Some insurance companies and some insurance agents call this "other than collision" because it pays for damage other than damage caused by a collision.) As with collision coverage, opt for the highest deductible you can afford. This should generally be capped at $1,000. If your car is worth under $3,500 and you can afford to buy or finance a new car, it usually makes sense to drop comprehensive coverage.

Auto insurance is a complicated topic. Agents may not explain all of the different coverages to you, and they may try to get you to buy additional coverages you don't need. You should always ask for a sample policy to read before you agree to buy any auto insurance policy. Make sure you shop around and do not just buy insurance based on who is the cheapest. Compare apples to apples and buy from a company with a history of paying claims timely manner.

Additional resources:

United Policy Holders: Empowering the insured

California Personal Injury and Insurance Blog

California Department of Insurance

Comparison rates for auto insurance

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