Auto Insurance companies have mastered the art of marketing their products.  I would love to have a pet gecko that spoke with a charming cockney accent, and I must admit, Flo from those progressive commercials is strangely alluring.   But insurance companies do a lousy job of explaining what it is that they actually sell.

First things first.  Auto insurance is a contract.  That means that whoever writes the contract (the insurance companies), gets to decide what the contract says.  As you can probably guess, this means that insurance contracts are usually written to benefit the insurance company.

Also, since each insurance company (or “insurance carrier”) is free to write their own contract, each contract will be different.  With that in mind, here are some general rules.  You should read your own insurance contract to find out what your particular contract says.

Liability Insurance (Or “Bodily Injury” Insurance)

This is the most basic type of insurance.  Liability insurance protects you from having to pay out of your own pocket in the event that you injure or kill someone while operating your insured vehicled.

In California, the minimum liability insurance  is $15,000/$30,000 (or “15/30”) policy.  This means that the insurance company can pay the injured parties up to $15,000 per person, up to a total of $30,000 if multiple people are injured.

Property Damage Insurance

Property damage insurance pays for things/objects that you accidentally destroy while driving your car.

For instance, lets say you get into a car crash and smash up someone’s new Ferrari, and he happens to be carrying a new flat-screen television in his trunk.  If the crash was your fault, you may have to pay for a new Ferrari and the new TV that you smashed.  This is where having Property Damage Insurance comes in handy.

In California, you must carry a minimum of $5,000.00 in property damage insurance.

Collision Insurance

Collision insurance pays for your car, if it gets in an accident.  Collision insurance is an optional insurance add-on, meaning its not required by law, and so you will have to pay extra every month if you want to purchase it.

Usually, collision insurance pays to repair your car even if you are at fault.  Collision insurance is also useful if your car is damaged by another driver who is either uninsured or has a small amount of property damage coverage.

Medical Payment Insurance (“Med Pay”)

Med pay insurance pays your (and your passengers’) medical bills, no matter who is at fault.  This means that even if you cause a crash, you may be able to get some of your medical bills paid for.

Med pay insurance is usually sold in increments of $1,000.00 or $5,000.00.  It’s actually a pretty handy type of insurance to have.  Unfortunately, most people don’t have med pay insurance because it’s optional.

Un-Insured/Under-Insured Motorist Coverage (UM/UIM insurance)

What do you do if you are injured by a driver that has no insurance, or who carries California’s minimum insurance limit of $15,000.00 ?  That 15 thousand dollars isn’t going to go too far if you have a hundred thousand dollars in medical bills.

You can sue the driver directly, but driver’s who are irresponsible enough to drive without insurance usually don’t have a lot of assets.  Even if you obtain a million dollar judgement against the person, it’s not going to be worth anything if the person has no money to give you.

This is where UM/UIM insurance comes in.  If you are injured by an un-insured or minimally insured driver, you can actually sue your own insurance company for up to your under-insured policy limit.

UM/UIM insurance usually starts at $100,000.00.  In a state like California, where there are thousands of uninsured or minimally insured drivers, UM/UIM insurance is extremely important.  Unfortunately, this type of insurance is optional, and many people don’t even know about it, let alone purchase it.

Be forewarned however:  insurance companies don’t just hand this money over.  When trying to collect your UM/UIM insurance, your insurance company is treated like an adverse party!  This means that you will usually have to get your own personal injury attorney to represent you, and your insurance company will hire their own lawyer to defend their suit against you!

Comprehensive Insurance

Comprehensive insurance is similar to collision insurance, except it insures you for things other than just car crashes, such as fire, theft, or other things that may damage your vehicle.

Common Questions

Q:  If I have a standard $15,000/$30,000 liability policy, can I ever receive that money?

A:  No!  Liability insurance is only payable to people that you accidentally injure.

Q:  What is the point of getting a larger liability policy?

A:  The purpose of any liability policy is to protect your assets.  If you own a car and a house, and you have a high-paying job, you might want to get a higher insurance policy.  If you don’t have any insurance, and you hit someone with your car, the injured person can sue you.  With a higher insurance policy, the money that goes to the injured person will come from your insurance policy, instead of out of your pocket.

Q:  What are the minimum insurance requirements in California?

A:  In california, according to California Insurance Code §11580.1b in order to drive legally you must have*:

  • $15,000 for injury/death to one person. (Liability insurance)
  • $30,000 for injury/death to more than one person. (Liability insurance)
  • $5,000 for damage to property.(Property Damage)

*  Please note, this information may change.  Please consult a lawyer for the current status of the law.

If you have any questions, feel free to contact me.

Noah F. Schwinghamer, Esq. is an attorney in Sacramento California.  None of the above should be considered legal advice.