Different types of car insurance, what you must buy, and what you should buy in California
Car insurance is packaged into many different coverage types and bundles. In order to decide what bundle you should purchase, you first need to understand what each type of coverage actually protects. You then need to figure out what the bare minimum coverage is required under California law, and then what extra coverage you should buy, in order to protect you, your family, and your assets.
One important fact to remember is that you always purchase insurance to protect you and your family. No matter which coverage you end up choosing, you are protecting your own assets when you acquire each type of insurance.
Below you will find a list and brief description of the different types of insurance coverage you can buy.
- Bodily Injury. Covers bodily injuries (or even death) caused by you to other people. This may or may not include persons in your car. They typically exclude those who are also on your policy.
- Property Damage. Covers damaged caused by you to property owned by others. This may be their vehicle, but also a bike, motorcycle, lawn, house, fence etc.
- Comprehensive Coverage. Covers your vehicle (and in some cases other cars that are driven by you) for any damage or loss caused by something other than a collision, such as theft.
- Collision coverage. Covers your vehicle (and sometimes any car you are driving) when you hit someone else, or someone else hits you.
- Uninsured Motorist. Covers you, your passengers, or anyone on your policy when they are injured by an uninsured or underinsured motorist.
Minimum coverage limits, and whether it’s enough
California requires that all vehicles driven or parked on public roadways carry “financial responsibility” and be able to show evidence of it. One type of financial responsibility, and the most common, is car insurance, also known as liability insurance.
California requires that those who buy vehicle insurance purchase at a minimum, liability coverage for:
- $15,000 for injury/death to one person
- $30,000 for injury/death to more than one person
- $5,000 for damage to property.
Liability coverage will compensate someone other than the driver for personal injury or property damage. You cannot purchase one of the other types of coverage to satisfy the financial responsibility requirement.
In addition to purchasing this coverage, you must also be able to show evidence of it:
- When asked by law enforcement
- When renewing vehicle registration at the DMV
- When involved in a traffic collision/accident.
This evidence must be carried at all times, or you face possible fines and punishment.
While the amounts listed above are the bare minimum required by California, for most drivers it makes the most sense to have limits that exceed the minimum requirements depending on desire for protection and your ability to afford the higher coverage limits.
Recommended minimum coverage for auto insurance
So you are shopping for car insurance. You don’t need to look far just flip on the TV and watch one of many different insurance company commercials that play constantly on heavy rotation. From cavemen, to geckos, to catchy themes and/or jingles, it seems insurance companies are doing anything nowadays to separate themselves from the pack.
What they don’t tell you is that no matter which insurance company you go with, none of these commercials aim to educate you on how much insurance you need to buy. If you caused an auto accident in California, the last thing you want is too little coverage.
So how much should you buy? As much as you can afford. Any good insurance agent can tell you where the sweet spot is for purchasing coverage. Now, insurance policies are complex. So be sure to review the different types of auto insurance available to California drivers above. Now, after familiarizing yourself with the different types of coverage, determine the types of coverage you want in addition to the mandatory types, and then how much you coverage you want to pay for.
Again, a good agent will tell you where the sweet spot is when it comes to cost/coverage. But just in case they don’t, be sure to ask them to provide you with all the different levels of coverage, and their cost. You should be able to determine what you are willing or able to pay, and whether for just a little bit more money you can jump to much higher policy limits. Or pay much less and get almost the same amount of coverage. Only a comparison of actual rates and policy limits will tell you this.
You might be wondering why you even need to purchase higher limits. You don’t get the benefit of the higher policy limits, the other vehicle does if the accident is your fault. Or maybe you are afraid that if the other party finds out about your high limits they will go after you even more vigorously.
Just remember insurance is purchased for you, not for the party you hit or caused injury too. The insurance is to protect you. If you cause injury to another person, you owe them money. If you don’t have insurance, you risk being sued and having other valuables taken away.
Don’t forget Uninsured Motorist coverage as well. This protects you in the event the driver who hit you has no coverage. Again a careful and thorough review of the company’s quotes, up and down the line, will be required to purchase the optimal amount of coverage.