Yesterday we talked about 6 types of auto insurance coverage, and now it’s time to put the pieces together so you can understand how to use this information. The first question that comes to my mind is: “how much insurance do I need to buy?” Let’s explore that.
So, Liability insurance is kind of a group term to refer to the coverage that is used to pay another driver in the event of an accident where you were at fault. In context, that means if their vehicle was damaged or someone else was injured, the liability insurance you have will cover the costs up to a certain limit. What limit is that, you ask? It depends on the state where you live. Each state has different rules for how much liability insurance you are responsible for carrying. I live in California, so I’ll use that as an example here. But if you live elsewhere, you can go to the Department of Motor Vehicles (DMV) website for your particular state and the information should be available there.
In California, the required minimums are:
- $15,000 for injury/death of one person
- $30,000 for more than one person (aka accident maximum)
- $5,000 for property damage
So what does this mean? When you are purchasing insurance, this is the least amount of coverage that is acceptable in the state of California. Let’s say you were in an accident where you hit another car, and there were 3 people injured. As long as no one person needs more than $15,000 of medical expenses and the total of all three of their expenses do not exceed $30,000, the insurance company will take care of that. Additionally, if you haven’t caused more than $5,000 of damage to their vehicle, then it’s all gravy. If there’s more than that amount of damage and injury, that’s when you get into a pickle and things escalate. But, we’ll just focus on the positives-if it’s under $35k, you shouldn’t have to come out of pocket for the other driver.
In California, there are more ways to show “financial responsibility”. The most common way is to have insurance. Other options:
- Provide a cash deposit of $35,000 to DMV
- Show proof of self insurance to the DMV
- A $35,000 surety bond from a licensed company
Should you feel tempted to roll around with no insurance and the DMV notices, they will suspend your registration. If you still don’t get insured, they can impound it. Not cute! If you want to cancel and change insurance carriers, you need to notify the DMV first so they don’t hunt you down. After that you have 45 days to notify them on new coverage. Be sure there are no gaps in coverage while you’re driving though, of course that would be the day when your luck goes south.
The most important thing to takeaway from this is that you’re required to have some level of coverage to protect other drivers. Liability won’t take care of you or your car, so keep that in mind if you choose to go with minimum coverage, okay? We’ll talk more about covering yourself tomorrow so stay tuned!
Do you think you would be comfortable with the minimum amount, or would you want more coverage? Comment or Tweet me to let me know!