The truth is most people do not understand auto insurance in California and they probably won’t even look at their policy until they need to file a claim. More often than not, people are underinsured and when they file a claim, they are surprised to find they don’t have the coverage they need. The problem with this is that by the time they file a claim, it’s too late to add more coverage or make changes. This results in shocking out of pocket expenses and emotional distress. Understanding your policy prior to filing a claim is the best way to ensure that you have the appropriate amount of coverage. Even knowing a few basics can take you a long way in preventing unnecessary stress and financial problems.
Insurance Requirements in California
Most people don’t know the only auto insurance requirement in California is to have the appropriate amount of liability coverage. Liability coverage pays for the damage that you cause when you hit someone or his or her vehicle. The law expects drivers to have $15,000 for injury or death to one person, $30,000 for injury or death to two or more persons, and $5,000 for property damage.
Initially, it sounds great that the only requirement is to carry liability insurance. A closer look, however, will make you reconsider whether that’s enough insurance. First, if you think about the cost of medical bills, $15,000 won’t cover even some of the most basic medical visits. Seeing a specialist can be quite expensive, which is what typically happens in accidents. Another thing to consider is the amount of coverage for property damage. Hitting a light pole may cost way over $5,000 to repair. After the insurance pays their part, who is left with the rest of the bill? You got it, you are.
The minimum auto insurance in California doesn’t cover enough for others and it doesn’t cover anything at all for you or your car. While the law only requires the minimum amount of insurance, it is simply insufficient and can leave people in mountains of debt if they are in even a minor accident.
Comprehensive coverage, although not required in the state of California, provides coverage for incidents that happen to your car that are not related to a collision. For example, if your car is destroyed by fire or theft, comprehensive coverage will pay for it. Comprehensive coverage also covers floods. See why it’s important? It’s particularly important in California with car theft being at an all-time high.
Without comprehensive coverage, if someone steals your car, you have to pay out of pocket. Most people are not aware that the law does not enforce them to have comprehensive coverage, thus, when they ask for the basic coverage, they are not getting coverage for their own vehicle. They typically realize this when they file a claim and by that time it’s too late.
Fortunately, if the car is financed or leased, most finance companies require some comprehensive coverage. Finance companies want to make sure that their investment is protected until you pay them off. As such, they will likely ask their customers to carry a minimum amount of comprehensive coverage. But once you pay the car off, it’s on you to remember when you get auto insurance in California to ask for comprehensive coverage.
What coverage protects your vehicle when you are involved in a collision? Collision coverage saves the day. Collision coverage is another important coverage that many people do not have. Collision is what makes sure that you don’t have to pay out of pocket for your car repairs should you be in an accident. Car repairs are quite expensive these days and even a minor fender bender can result in thousands of dollars of repairs.
Similar to comprehensive coverage, finance companies typically require the customer to carry a certain amount of collision coverage. It is important to ask the finance company how much comprehensive and collision coverage they want you to have on the car. Again, do not assume that the dealer or the insurance company will ask you to get it or the correct amounts, especially if you own your car.
Uninsured and Underinsured Motorist Coverage
California has one of the highest rates of uninsured and underinsured motorists. This makes it particularly risky to drive around because if someone without any coverage or who does not have enough coverage hits you, you are left paying for the damage out of pocket. This is, of course, unless you have uninsured and underinsured motorist coverage. The uninsured and underinsured motorist coverage is essential for people in California to have due to such high rates of people without insurance and proper coverage.
Although health insurance can help pay for medical expenses when you’re in an accident, it is helpful to have medical and funeral coverage through your auto insurance provider as well. Auto insurance in California offers medical and funeral benefits, but it is optional. Medical and funeral coverage will help pay for bodily injury to you and your passengers. It will also pay for your medical payments and/or funeral costs should you be struck as a pedestrian.
Another coverage worth mentioning is rental coverage. Many people assume that they will automatically get a rental car should their car be out of commission from an accident, but this is an incorrect assumption. In order to get a rental car during car repairs, you must carry rental coverage.
A fairly inexpensive coverage that comes in handy is the towing and labor coverage. This covers times when you need a jump or you need your car to be immediately towed. This is a great way to avoid costly expenses if your car breaks down.
Now that you have a deeper understanding of auto insurance in California, it may be helpful to look at the coverages you have on your policy to make sure you are properly insured.