In California, all motorists are required to carry auto insurance to protect others in the event that they are involved in accidents. In addition to basic liability coverage, there are several additional types of insurance that can offer you a greater degree of protection. Automobile insurance is required to help cover the injuries and damage to another person’s vehicle if you are at fault in causing an accident. Additional forms of auto insurance provide coverage for your injuries and property damage to your vehicle. In this auto insurance guide, we will discuss the various types of auto insurance that are available in California and explain the advantages of each type.
California Auto Insurance Law
Under Cal. Veh. Code § 16056, all drivers operating vehicles within California are required to show proof of financial responsibility for the vehicles that they own. This law is in place to protect others in the event they are injured or suffer property damage in an accident a motorist might cause. In most cases, people in California demonstrate financial responsibility by purchasing auto insurance. This law requires you to carry proof of your valid and effective financial responsibility in your vehicle at all times.
If you are pulled over by a police officer and do not have valid liability insurance for your vehicle, you could face several penalties. Under Cal. Veh. Code § 16029, a first offense of driving without valid insurance can result in a fine from $100 to $200, the potential suspension of your license, and the potential that your vehicle could be impounded. The fines increase if you are convicted of driving without insurance for a second or subsequent time. It is not worth the risk to drive without auto insurance in California. You can also opt to purchase more auto insurance than the minimum state requirements.
Understanding Automobile Insurance Policies
Automobile insurance policies are legally enforceable contracts between people and their insurance companies. Your auto insurance policy will include information about your premium costs, the various types of coverage that are included in your policy, and any exclusions that your policy will not cover. It is important for you to carefully review your auto insurance policy to understand the types of coverage you have and whether you might need to purchase additional coverage. Below, we’ll explain the various types of auto insurance coverage that are available in California so that you can make a decision about the types of coverage you might want to have in place.
- Personal Liability Auto Insurance Coverage
If you drive in California, you are required to have at least the state’s minimum required liability coverage on your vehicle. As previously explained, driving while uninsured can result in stiff fines and a suspension of your license for as long as four years. The minimum liability insurance requirements in California include the following:
- Bodily injury coverage- $15,000 for one injured person
- Bodily injury coverage – $30,000 for two or more injured people per accident
- Property damage coverage – $5,000 per accident
When you purchase auto liability coverage, your insurance company is also legally required to offer you uninsured motorist coverage. However, this type of added insurance can be waived.
The main advantages of only purchasing the minimum auto liability insurance are that it is cheap and allows you to comply with the state’s insurance requirements. However, it is important to understand that carrying personal liability coverage will only pay for the losses others might suffer when you cause an accident. If you are injured in an accident or suffer property damage, your minimum auto liability policy will not pay for any of your losses.
It is very risky to only purchase the minimum amount of liability coverage. If you cause a serious injury accident, the minimal coverage required in California will be unlikely to be enough to cover the victim’s injuries and other losses. Similarly, $5,000 in property damage coverage is quite low with the expense of vehicles today. This could mean that you could be personally liable in a claim to pay the amounts that are not covered by your auto liability policy, making it important for you to consider other available types of auto insurance coverage.
- Comprehensive Auto Insurance Coverage
Comprehensive auto insurance coverage is a type of coverage that covers damage to your vehicle caused by theft, fires, vandalism, riots, natural disasters, and other incidents that are not your fault. Comprehensive coverage does not cover damage to your vehicle caused by a collision. However, if your vehicle is damaged in a different type of incident that was not your fault, carrying comprehensive insurance can help you repair or replace your vehicle. If you lease or finance a car, you will likely be required to carry comprehensive coverage by the lender or leasing company.
Comprehensive coverage is available with different deductibles. Policies with lower deductibles are more expensive than those with higher deductibles.
Collision Auto Insurance Coverage
Collision coverage is a form of auto insurance that will cover damage caused to your car in a collision with another vehicle, pedestrian, bicycle, motorcycle, truck, or stationary object. Like comprehensive coverage, this additional type of insurance is often required by lenders when you finance or lease your vehicle. Like comprehensive coverage, collision coverage will pay to either repair or replace your vehicle, whichever costs less. You will still need to ensure that your policy’s limits are high enough to cover the replacement cost of your vehicle in case it is totaled since your insurance company will not pay more than your policy’s limits.
Uninsured and Underinsured Motorist Coverage
When you purchase an auto insurance policy, the insurance agent is required to offer you uninsured and underinsured coverage. While you have the ability to waive this coverage, it is a good idea for you to purchase it. UM/UIM coverage pays benefits to you for your losses that are not covered by the other motorist’s policy when the other motorist is at fault for your accident. Even though California requires motorists to purchase at least the minimum liability insurance coverage, some drivers still drive without insurance. Without uninsured motorists’ coverage, you could be left without an avenue of recovery if you are involved in an accident with an uninsured driver.
Underinsured motorist coverage is designed to pay benefits to you when your losses exceed the policy limits of the driver’s policy who was at fault in causing your accident. As previously noted, the minimum required liability amounts are quite low. If you are seriously injured in an accident with an underinsured driver, his or her policy might not be enough to cover your medical expenses, property damage, and other losses. In that case, you can submit a claim to your insurance company under your UM/UIM policy, and the company will pay any amounts not covered by the other motorist’s insurance policy up to your policy limits.
You might think that you don’t need UM/UIM coverage if you have health insurance. However, you should keep in mind that your health insurance will require you to pay copays and deductibles. Those expenses can quickly add up if you are seriously injured in an accident. By contrast, you will not have to pay copays if you are covered by a UM/UIM policy when you are involved in an accident with an uninsured or underinsured motorist.
It is a good idea to go ahead and purchase UM/UIM coverage when you buy your insurance policy. You should also get this coverage in the same liability amounts as what you choose for your liability policy. The cost of adding UM/UIM coverage to your policy is fairly low, and it can offer good protection to you if you have the misfortune of being involved in an accident with an uninsured or underinsured motorist.
- Medical Payments Insurance Coverage
Medical payments insurance coverage is a no-fault coverage that is available in California. It covers your medical bills if you are injured in an accident. Your claim for Med Pay coverage cannot be denied even if you were at fault in the accident. You might be able to file a claim with your insurance company for coverage under Med Pay if you are injured while riding as a passenger in someone else’s car, are struck by a car as a pedestrian, or are injured while riding on public transportation. However, medical payments coverage will not cover any costs to repair your car.
- Gap Insurance Coverage
Gap insurance coverage is a type of insurance coverage you can purchase when you finance or lease a vehicle. This type of coverage will cover the difference between the value of your car and the amount you still owe on it if it is totaled in a crash. Since vehicles start rapidly depreciating as soon as they are driven off of the car lot, this type of coverage should not be overlooked.
For example, if you purchase a vehicle for $30,000 and put down $2,000, you will have a remaining balance on your auto loan of $28,000. If you then total your vehicle in a wreck a few months later and have comprehensive and collision coverages, your insurance company will agree to pay you the actual cash value of your vehicle. With depreciation, this amount could be significantly lower than the amount you have remaining on your auto loan. If the insurance company says that your vehicle’s actual cash value is only $22,000, you will be on the hook for the difference out of pocket without gap insurance.
Choosing the right insurance coverage for your vehicle is important. When you have the right types of coverage in the amounts that you can afford, you should be protected if you are involved in a collision whether or not you or someone else is at fault. Make sure to review your coverage options with your insurance company, and choose the most coverage that you can reasonably afford.