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Overpaying on car insurance?

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Overpaying on car insurance?

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Liability Insurance California

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Under California law, all drivers and owners of motor vehicles are required to maintain financial responsibility and to carry proof of it in their vehicles at all times. The most common form of financial responsibility is a liability insurance policy, which helps pay for medical expenses for injured parties and damage to property when you’re at fault in a car accident.

Minimum Liability Insurance in California

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If you don’t have car insurance or you have an accident not covered by your policy, your driving license will be suspended, and you could be fined or have your car impounded. If a car is involved in an accident but the driver can’t be identified, the car owner’s driving license will be suspended.

The minimum coverage for liability insurance in California must meet the following limits per collision:

  • $15,000 for the death of or injury to a single person
  • $30,000 for the death of or injury to more than one person in a single accident
  • $5,000 for damage to another person’s vehicle or property

Before you buy car insurance, you should check that your agent or broker and the insurance company are licensed by the California Department of Insurance. You can do this by calling 1-800-927-HELP.

Visitors to California

If you’re a visitor to California or have recently moved to the state, you should be aware that not all insurance companies from other states are licensed to do business in California. Before driving in California, confirm with your insurer that you’re covered if you have an accident in the state.

If you’re involved in a collision in California, your insurance policy must meet the following three conditions:

  1. Your car must be insured before you travel to California. Once your vehicle is registered in California, you can’t renew an insurance policy from another state.
  2. Your liability insurance must meet or exceed the bodily injury and property damage coverage stated above.
  3. Your insurance company must file a power of attorney allowing the DMV to act as its agent for legal services in California.

Failing to meet the criteria could result in your driving license being suspended.

Other Forms of Financial Responsibility

While most drivers and vehicle owners in California opt for liability insurance coverage as evidence of financial responsibility, you can get coverage in other ways, depending on your circumstances. According to the DMV, there are three other forms of financial responsibility other than an insurance policy:

  • A cash deposit of $35,000 with the DMV
  • A surety bond of $35,000 from a company licensed to do business in California
  • A self-insurance certificate issued by the DMV

You must carry proof of financial responsibility in your car whenever you drive and show it to a police officer when asked if you’re stopped or involved in an accident. If you can’t show it, you could get a ticket, have your driver’s license suspended, and have your vehicle impounded. You must also show evidence of your financial responsibility when you’re renewing your vehicle registration with the DMV.

Other Types of Insurance Coverage

Liability insurance in California is the minimum coverage and only covers injury and damage to other people. You’ll need to take out additional insurance to cover your own injuries, vehicle, and property. Here are some of the other types of insurance coverage:

  • Collision insurance pays for the repair or replacement of your car if you’re in a collision with another vehicle or a stationary object, such as a tree.
  • Comprehensive insurance covers your car for incidents such as fire, theft, vandalism, weather damage, or a collision with an animal.
  • Uninsured motorist coverage pays for medical expenses for you and your passengers and damage to your car if you’re in a collision with an uninsured or underinsured driver who is at fault.

You can also get coverage for additional equipment such as audio and navigation systems, custom wheels, and smartphones; breakdown and recovery services; and rental reimbursement for renting a vehicle while yours is being repaired after a collision.

California Deductible Waiver

When you take out an auto insurance policy, it will include a deductible, which is the amount you have to pay toward a claim before the insurance company pays out. For example, if you have a claim of $1,500 and your insurance has a $500 deductible, you will pay the first $500, and your insurance company will cover $1,000.

If your car insurance includes collision coverage, you could be eligible for the California Deductible Waiver. This means your insurance company would cover the collision deductible on a claim when an uninsured driver has caused the accident.

Car Loan or Lease Cover

If you have financed or leased your new car, the lender or lease company will usually require you to have full insurance coverage for the value of the vehicle. If you don’t take out the appropriate coverage, the lender might do so and charge you for it. It’s generally cheaper to buy your own comprehensive and collision coverage.

If your financed vehicle is totaled, the insurance will only pay the market value for the vehicle. If that is less than what you still owe for the car, you’ll have to pay the difference. That’s why it’s a good idea to take out Guaranteed Asset Protection (GAP) insurance, which covers that eventuality.

Commercial Auto Liability Insurance in California

Commercial car insurance helps cover the costs of medical expenses and property damage caused by an accident involving an employee using a company-owned vehicle. This coverage can help protect you, your business, and your employees in the event of an auto accident. Commercial auto insurance is for companies that:

  • Own, rent, or lease cars, vans, or trucks
  • Have employees who use their own cars for business
  • Have employees who drive company-owned, rented, or leased vehicles

Your business will be covered if, for example, an employee collides with another vehicle, swerves off the road and crashes into private property, or hits a pedestrian resulting in expensive medical costs.

While liability insurance in California is the minimum legal requirement for drivers, the actual amount of auto insurance coverage you take out is down to your choice and your budget. However, being underinsured if you have an accident can leave you open to lawsuits and the risk of losing your assets.

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

We’re here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.

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About the Author

FIXD Research Team

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

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