It’s the law
You are required by law to show financial responsibility, which is usually done by purchasing insurance. This is to protect the other people who share the road with you.
Protecting yourself financially is smart
You as a driver of a motor vehicle are responsible for the accidents you cause. Having no insurance or inadequate insurance isnotsmart. People often look at the money they paid for their unused insurance as “wasted”. I think that’s the wrong way to look at it. I like to view insurance as this guy with a bag of money who promises to use it if needed. You’re paying to keep that guy interested in keeping his promise.
Liability
Liability is usually divided into two categories: Bodily Injury and Property Damage. Bodily Injury covers injuries to others (not you or your passengers) while Property Damage covers damages to things such as other people’s cars, their garage door, their tree and so on. Usually it is written down like this: 15/30/10, which means $15,000 in Bodily Injury coverage per person, $30,000 per accident, and $10,000 in Property Damage per accident. This happens to be the current minimum liability limits that California law requires. It’s also too low. $10,000 is all that would be paid out if you totalled a car. Now, how many new cars can be had for $10,000? The owner of the car will expect you to make up the difference. We always try to get customers to at least increase their coverage to 25/50/25, which is a good increase in coverage for a small amount of money.
Frequently, we are asked what an appropriate amount of insurance would be. Unfortunately, there is really no correct answer. One could always imagine an accident that would exceed a particular amount of insurance. The idea is to set a limit that is comfortable from the standpoint of protection versus cost.
Uninsured Motorist (UM)
Some of our clients try to skimp on this coverage however we discourage it. After all, it is the only coverage to protectyouand yourpassengers. In California, as many as 1 in 6 drivers may be uninsured. In addition, there is also Underinsured Motorist coverage which for California is combined with UM. This provides protection for injuries to your or your passengers when the other driver doesn’t haveenoughinsurance.
Comprehensive
Comprehensive coverage is sometimes called “other than collision” and covers damage to the vehicle for causes such as fire, theft, windstorm, flood, and vandalism, but not loss by collision or upset.
Collision
Collision coverage is for damage to a vehicle due to colliding with another vehicle/object or overturning. One way of remembering what is covered by Collision versus Comprehensive is this: If you drive into a tree, that is collision. If the tree falls on your car, then Comprehensive would be the coverage involved.
Medical Payments
This is an optional (and very inexpensive) coverage for the insured and passengers. It usually has a lower limit but is paid out regardless of fault.