Auto Insurance

Car insurance is a contract that you make with an insurance company. If you have car wrecks or if the vehicle sustains other unexpected damage, then your insurance policy can help you pay the costs of repair bills, injuries or other damage. By letting insurance pay on your behalf, you can often avoid having to pay a lot of money out of pocket. You’ll preserve your own solvency even in the face of accidents.

Nearly all states require drivers to insure and register their vehicles. California is no exception. By law, all drivers must carry proof of financial responsibility. Usually, they get this proof by buying liability insurance of at least the following limits:

• Bodily Injury Liability Coverage: $15,000 per person/$30,000 per accident
• Property Damage Liability Coverage: $5,000 per accident

Though the policyholder is the person who buys the liability coverage, it pays other people on behalf of the insured. California is an at-fault insurance state, which means that drivers who cause accidents must pay for damage done to others, like another driver they rear-end at a stoplight. The bodily injury coverage will pay for the other driver’s injuries while property damage coverage can help them repair their vehicle.

The more car insurance you have, the more protection you have in case of the costliest vehicle losses. Therefore, you should buy more than just the minimum liability coverage required to keep you legal.

• Consider increasing your liability coverage limits. In case of high-cost accidents, your policy will cover more of the costs. Some drivers also buy umbrella liability insurance. If a liability claim exceeds your standard policy limits, then umbrella coverage can pay for the outstanding costs.
• Buy physical damage insurance to cover damage to your own car, particularly if you finance or lease it. Collision coverage will pay for damage to your car after wrecks. Comprehensive coverage will pay for damage from hazards like fires, theft, vandalism or weather.
• If an accident is not your fault, someone else’s liability insurance might be the coverage to compensate you. However, if that person does not have liability insurance, then uninsured motorist coverage can pay for your damage instead. A similar type of coverage called underinsured motorist coverage can pay if someone has liability insurance, but it is not adequate to cover all your damage costs.
• Many policies also include medical payments (MedPay) coverage or personal injury protection (PIP insurance). MedPay coverage can pay for your injuries if you get hurt in a wreck. PIP coverage will pay for medical costs and other losses like lost income or death benefits.
• Drivers who have a lease or vehicle loan might need gap insurance. If you total your car, and the value of your loan costs more than the value of your insurance settlement, then gap coverage can pay off the remaining money.

Most auto insurance policies will include deductibles. A deductible is the insured person’s financial responsibility before the policy will pay for remaining costs of a claim.

Suppose that your collision coverage has a $500 deductible. If your car sustains $4,000 in wreck damage, then you will pay the first $500 and your insurance will pay the remaining $3,500 for the repairs. However, if you only have $400 in damage, then your deductible will not pay at all. Always choose a deductible you can afford to pay on your own.

Most estimates place the cost of car insurance in California at about $1,700 per year. However, various factors such as your vehicle value, the amount of coverage you buy, your location and your driving history might impact your premiums.

If you have a lot of claims on your insurance record or have a history of tickets or other traffic offenses, then your auto insurance price might go up. However, if you are worried about your ability to get affordable coverage, remember that many infractions won’t remain on your record forever. Most insurers will only look at approximately 2 – 3 years of your driving history to determine your premium. Therefore, if you keep a clean record over that period, then you might save money.