Understanding Automobile Insurance Coverages
The Department of Motor Vehicles (DMV) requires liability insurance in order to register and operate a vehicle, it is of great importance to purchase and to fully understand your automobile insurance policy.
Liability Insurance: Coverage for a policyholder’s legal liability resulting from injuries to other persons or damage to their property. The limits refer to the maximum amount of benefits the insurance company agrees to pay in the event of a loss. This coverage is required to operate a motor vehicle in California.
Uninsured Motorist Coverage (UMC): Provides coverage for a policyholder involved in a collision with a driver who does not have liability insurance or who does not have sufficient liability limits to pay for damages. UMC comes in two parts: uninsured motorist bodily injury (UMBI) and uninsured motorist property damage (UMPD). UMBI coverage pays for injuries to you or any person in your car when there is a collision with an uninsured driver. UMPD coverage pays for the property damage to your car when there is a collision with an identified uninsured driver. UMC must be offered when you purchase liability coverage for your auto. If you decline UMC, you must sign a declination waiver.
Collision Coverage: Pays for damage to your car caused by physical contact with another vehicle or with another object, such as a tree, boulder, guardrail, structure, or person.
Comprehensive Coverage: Pays for damage to your car caused by reason other than collision, such as fire, theft, vandalism, windstorm, flood, etc.
Medical Payments Coverage: Covers the medical costs (up to the specified limit) resulting from an auto accident for you, your family, or others in your car. This coverage pays regardless of fault.
Rental Reimbursement Coverage: This coverage pays your expenses to rent an auto if you have a loss covered under Comprehensive or Collision benefits. Coverage is sold based on a daily amount of expense subject to a maximum limit.
Towing Coverage: Addition to an automobile policy that pays a specified amount for towing and related labor costs.
Quotation: An estimate of the cost of insurance based on the information supplied to the agent, broker, or insurance company.
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What is Automobile Insurance?
Automobile insurance is simply a contract that helps pay for certain types of financial losses or obligations resulting from the use or ownership of an automobile. To obtain this contract (insurance policy), you pay a specified amount of money called a premium. In return for the premium paid, the insurance company agrees to pay certain expenses and legal liabilities depending on the terms of the insurance policy. Having the right insurance coverage may prevent you from suffering a large financial loss in the event of an automobile accident. The responsibilities of owning and driving an automobile include following the financial responsibility laws under the Vehicle Code. The most common way to satisfy the financial responsibility for operating an automobile in California is by purchasing automobile liability insurance. If you choose to meet your financial responsibility by purchasing liability insurance, the DMV outlines minimum limits that you must purchase under Section 16451 of the Vehicle Code.
What Could Happen if I Ignore This Law To Purchase Liability Insurance? The most common way drivers choose to comply with the financial responsibility requirement is by purchasing an automobile liability insurance policy. If you have an accident not covered by insurance, then your license may be suspended. It is your responsibility to provide liability insurance for any vehicle you own regardless of who is operating the vehicle. It is illegal for vehicles to be operated without meeting the requirements of this law.
When Must You Show Proof of Insurance?
The Legislature passed a law requiring motorists to produce proof of insurance before the DMV renews the vehicle registration. The new legislation also requires motorists to display proof of insurance when they are stopped by a police officer for traffic violations. Drivers who can’t do so may be subject to fines and other penalties. Proof of financial responsibility must be shown when you:
• Are asked for it by a law enforcement officer;
• Have an accident;
• Register your car or renew its registration; or
• Get your car inspected
How Do I Prove I Have Insurance? Your insurance company will send you a proof of insurance card listing the covered automobiles and drivers and showing the policy number and expiration date. Your policy or a temporary binder also is acceptable evidence of insurance.
What Happens if I Don’t Carry Insurance?
In California, driving without insurance is a serious offense. Failure to show proof of insurance when requested may result in fines or a suspended license. Remember, driving is a privilege … not a right. If you are stopped by a police officer and asked for proof of insurance and you can’t produce it, you may receive a citation. You can have the ticket nullified by showing proof of insurance in court. You could, however,
be assessed an administrative fee for expenses.
Physical Damage (collision and comprehensive)?
Neither of these cover mechanical breakdown or normal wear and tear. Collision covers damage to your vehicle caused by collision with another vehicle or with any other object, regardless of fault. Collision insurance covers vehicle upset (overturn), but does not cover bodily injury or property damage liability. Comprehensive coverage covers damage to your car caused by reason other than collision, such as fire, theft, windstorm, flood, vandalism, etc.
What Information do I Need to Have Ready When I get a Quote?
You need to know what coverages you want, what limits of liability you require, and what deductibles you desire. Also,
you need to have the following basic information available on all drivers in your household:
1. All drivers’ names, ages, sex, and marital status;
2. Driving record (accidents and moving violations);
3. Annual mileage; and
4. The following information on all cars:
• full vehicle identification number
• year of vehicle
• special equipment if any
Financial Responsibility Laws A policy with BI of $15,000/$30,000 and PD of $5,000 will pay out as follows: The maximum limit for one person’s injuries, medical expenses, etc. is $15,000 under the bodily injury portion;
• If two or more people are injured, the maximum limit for the accident will be $30,000;
• The maximum limit for damage to other people’s property (their car, their fence, etc.) is $5,000.
There are four ways to accomplish financial responsibility: 1. Coverage by a motor vehicle or automobile liability insurance policy;
2. A cash deposit of $35,000 with the DMV;
3. A certificate of self-insurance issued by DMV to owners of fleets of more than 25 vehicles; or
4. A surety bond for $35,000 obtained from an insurance company licensed to do business in California.
All California drivers and owners must have at least the statutory limits of minimum liability insurance or an approved alternative way to pay for injury or property damage they may cause.* Penalties are very severe for non-compliance with this section of the vehicle code. When your car is in an accident for which you are found legally liable, bodily injury (BI) liability covers your liability to others for injuries to them. Property damage (PD) liability covers your liability for damage to someone else’s property.