As a trial lawyer practicing for over 30 years, I’ve been surprised at how many people over the years are totally confused about what car insurance covers and how much insurance they should carry.
My parents recently asked me about the types and amount of coverage they should have and I’ll share with you the advice I gave them.
First, there is no such thing as “Full coverage”. Most clients, when I ask them what they carry, say they have this..yet none know what it means. Neither do I.
Here are the main varieties of Auto Insurance in California.
BODILY INJURY LIABILITY COVERAGE
This is insurance that protects you in the event that you are at fault in an accident.
It is usually sold in denominations such as 15/30, 25/50. 100/300 or 300/500.
What this means is that if you have 15/30 coverage, the most that your insurance will pay if you are at fault is $15,000 to one person or $30,000 to everyone that you cause injury to.
Since a night at UC Davis Medical Center can easily cost over $20,000, you are really taking a risk if you have a small sum of bodily injury coverage and you cause a serious injury. Your assets can be totally wiped out if the seriously injured person sues you and obtains a judgment far in excess of your policy.
My advice to most people is to carry a minimum of 50/100 bodily injury insurance no matter how little earnings and assets you may have.
For people in their 20’s and 30’s that own a home, I’d suggest a minimum of 100/300 insurance. For those of you earning in excess of $75,000 yearly and have been in your home for more than 2-3 years, I’d say a 300/500 policy would be appropriate.
And if you are in the top 10% income or assets wise, I’d buy a 300/500 policy with a UM Umbrella of 1 Million or more.
An umbrella policy will pay the other side if their damages are in excess of your underlying policy. Make sure to ask your agent if he sells a UM Umbrella because you want the additional protection it affords you as I will explain later.
95% of all umbrella policies DO NOT contain UM Protection so make sure to ask.
UNINSURED and UNDERINSURED MOTORIST COVERAGE
This coverage protects you if you or anyone in your car is injured by another driver who is at fault up to the amount of coverage you have. I suggest you obtain the same coverages for UM or UIM coverage as I suggested above for Bodily Injury Coverage.
The ways this works is as follows. If you are hit by someone without insurance (As many as 25% of all California drivers), your own uninsured motorist insurance covers you up to your UM limits.
If you are struck by a driver with minimum limits of 15/30 and you have very serious injuries worth say 500,000, you would first collect $15,000 from the other parties insurance and then an additional $485,000 would be available from your own underinsured motorist coverage.
MEDPAY
This insurance pays medical bills of yourself or any passengers in your car regardless of who is at fault. I suggest everyone carry a minimum of $10,000 Medpay coverage because it is very cheap.
Even if you have health insurance you should buy Medpay because it protects others in your car who may not have health coverage and it affords everyone to get the best care and not necessarily what may be the substandard care of your health plan,
COLLISION COVERAGE
This will pay for property damage to any cars that are damaged up to the value of the policy. I normally suggest that people carry the sum of collision insurance suggested by their agent but with a good sized deductible if you can afford it.
For most cars, I’d suggest a $500 deductible but if the car is over 7 years old, you can really reduce your premium by selecting a $1000 or $2500 deductible.
COMPREHENSIVE COVERAGE
Protects you if your car is damaged by a flood, storm, fire or vandalism. I suggest the same limits as the collision coverage,
“Gap Coverage”
This coverage I suggest when people buy new or almost new vehicles. It protects you from the situation which can arise when you drive a new car off the lot. Typically, the value of the car can decline 20% almost as soon as its off the lot.
If you’re unlucky enough to have an accident at that time and your car is totalled, the other insurance (Or your own collision coverage) will only pay you the fair market value.
So if you piad $35,000 for a new car and get in a crash the next day, without “Gap coverage”, you be out around $7000.
Some of you may worry that the sums of insurance I suggest here will cost you a fortune..but they won’t! A 300/500 Bodily injury and UM policy will not cost 10X more than a 30,000/50,000 policy. Not even close.
You will pay a bit more for coverage, but you will be thankful if you are ever in a serious accident.
I gave the above advice to my parents and I give it to you as well.
Anyone having any question at all about auto insurance in California is always welcome to call me.