Introduction
Each state has its own rules regarding licensing and insurance. California has the highest number of licensed drivers compared to the other 49 states. In California, it's illegal to drive without insurance. If you are caught driving without insurance in California, you will be fined and your car may be impounded. If you cause an accident and don't have liability coverage, you are personally responsible for physical damages and injuries to the other party/parties.
Required coverage in California consists of liability; coverage for physical damage and for bodily injury. This covers damages in the event an accident is determined to your fault. Liability insurance does not cover damage to your vehicle and it doesn't cover injury to you or your family members who are in the vehicle at the time of the loss. You will need to purchase additional insurance to cover collision damage and injury to your or passengers in your own vehicle.
According to the California DMV, you must carry evidence of insurance in your vehicle at all times. It must be provided when requested by law enforcement, when you are renewing the vehicle registration, and when the vehicle is involved in a traffic collision, regardless of fault.
Useful Terms
POLICY DECLARATION: This document lists the dates when the coverage begins and ends and the amount paid. It also lists all drivers on the policy, including excluded drivers. All vehicles on the policy are listed here along with their VIN numbers.
PREMIUM: The policy premium is how much is paid for the personal auto policy. The policy period may be six months or one year.
AMENDMENT - ALSO REFERRED TO AS ENDORSEMENT: This refers to any change, substitution, or addition to the policy. Examples are excluded driver, addition of extra coverage like camper shells, out-of-country coverage, and others. Check with your agent for questions.
LAPSE: This refers to a policy that no longer covers the driver due to non-payment.
DEDUCTIBLE (co-pay): Just like a deductible is paid to your doctor when you have health insurance, a deductible is owed when there is any insurance payout. You will be able to choose the amount of deductible on your policy.
EXCLUDED DRIVER: Someone who is in your household that you don't want coverage for is excluded. You will need to sign the exclusion document. This may save money based on the driving record of the excluded party.
UNINSURED DEDUCTIBLE WAIVER (UDW): UDW applies when another party is at fault for a loss and is not insured. It will have to be confirmed that the other party is not insured before UDW is paid out.
TOTAL LOSS: Sometimes damage to a vehicle exceeds its value. If you carry collision coverage, the insurance company will pay up to the value of your vehicle. It is your choice whether you want to give it up for salvage or retain your vehicle and make repairs on your own.
FULL COVERAGE: Because different companies define this differently, the meaning of this is vague. It's better to refer specifically to each type of coverage to avoid any confusion.
Liability Insurance: Property Damage and Bodily Injury
In California, you are required to carry property damage coverage with a minimum of $5,000.00 and Bodily Injury coverage with a minimum of $15,000 per person with a maximum of $30,000.00 per incident. However, starting in 2025, this will change: The property damage Minimum increases to $15,000.00 and bodily injury minimum coverage increases to a minimum of $30,000.00 per person with a maximum per loss of $60,000.00.
Property damage covers not only damage or one or more vehicles damaged by you, but also physical property such as fire hydrants, trees, signs, fences, etc.
Important to Remember:
1. You are legally required to carry this coverage whether or not you are responsible for an accident.
2. You don't pay a deductible for repairs if there is a loss you are responsible for. Your policy is designed to pay out damages to third parties without the need for a deductible.
3. If damages caused by you as the operator of the at-fault vehicle exceed these minimums, you will be personally responsible for that excess and could be sued for those excess damages. You can reduce this risk by carrying more than the legally required minimum.
In lieu of liability insurance, you can make a cash deposit of $35,000 with the California DMV. You will need to carry the certificate from the state confirming that this is your coverage. Consult the California DMV for further information. dmv.ca.gov
Collision Coverage
In California, collision coverage pays for damages to your vehicle in the event of an accident, regardless of fault. Collision coverage is also known as first party physical damage coverage. If your vehicle is leased or financed (not paid off yet), you are required by the finance company to carry collision coverage. Your deductible will apply for this type of coverage loss.
If it is determined that a collision is caused by the other driver, your deductible may be waived or reimbursed to you. Check with your claims adjuster to review the possibility of reimbursement of your deductible. Uninsured deductible waiver, which is an optional addition to your collision coverage, will cover your deductible when the at-fault driver is not insured. You will need to provide evidence that the other driver is not insured.
Towing and storage fees are paid through collision coverage. If you have already paid for towing and/or storage, submit the receipt to your claims adjuster for reimbursement.
You may not be sure whether collision coverage is right for you. Here are some questions you can ask yourself and the insurance agent:
1. Is the vehicle leased or financed?
- Leasing and finance companies require that you carry collision and comprehensive coverage until the vehicle is fully paid for.
2. How old is this vehicle?
- With older vehicles, it may not be worth the cost to pay your premium for collision coverage. If a year's worth of premiums exceeds the value of your vehicle, consider dropping collision coverage. Tip: Keep your premium savings in a separate account to use in case of a collision.
3. Do you have an emotional attachment to the vehicle that increases its value to you?
- If so, it's a good idea to keep collision coverage on an older vehicle if you anticipate not wanting to give up the vehicle in case there are repairs needed or if it is a total loss.
Comprehensive Coverage
Comprehensive coverage in California offers compensation for damages that are not related to collision with another vehicle or physical impediment. Examples of comprehensive damage are fire, downed trees, moving items in the roadway such as tires or other items, rockslides, or landslides, fire, hail, flooding, falling rocks trees, vandalism, and other types of covered causation provided in your policy.
If your vehicle is leased or financed (not paid off yet), you are required by the finance company to carry comprehensive coverage. Your deductible will apply for this type of coverage loss.
Uninsured or Underinsured Motorist Insurance
The phrase "uninsured or underinsured" actually means two different things, but both are covered under this protection.
1. Uninsured: This will cover damages to your vehicle and injury in the event that the driver of the at-fault vehicle does not have coverage.
2. Underinsured: This coverage is similar to uninsured, but it happens when the at-fault driver has coverage, but not enough to cover all of your damages. This applies whether they are physical, like vehicle damage, or medical (any type of accident-related injury).
When uninsured motorist coverage applies, you are required to pay your deductible.
Medical Payments Coverage
In California, medical payments coverage pays the cost of medical expenses if you or your passengers are injured, up to the policy maximum. This coverage can pay for immediate medical care, no matter who is at fault. It covers the driver and passengers in your vehicle. Med pay coverage is particularly useful if you are not at fault, but the at-fault driver does not have the proper insurance, whether they are insured or underinsured.
Excess medical pay coverage is included in this category, but applies differently. Excess med pay is available only after you have submitted all medical billings to your personal medical insurance company. Excess med pay pay the excess that is not covered by your medical insurance.
A deductible is not needed for med pay or excess med pay claims.
Rental Coverage
Rental insurance is optional in California, but since Californians do a lot of driving, it is important if your vehicle is damaged and you have no other transportation. Your own policy will follow you into the rental, so it's not necessary to purchase additional insurance at the rental agency unless you don't have collision and comprehensive coverage.
This type of coverage is meant to provide substitute transportation while your vehicle is being repaired. Rental coverage is available for a specific amount of time, often up to 30 days, but if your repairs are not done in that time, you will be paying out-of-pocket for any additional rental days beyond what your policy states.
There is no deductible for rental coverage.
Gap Insurance
When you are leasing a vehicle or your vehicle has not been fully paid for due to a loan, gap insurance is something you need to consider. This coverage is used, along with collision or comprehensive coverage, to pay for damages to your vehicle regardless of fault. It is surprising to most new vehicle owners how much the vehicle value depreciates as soon as it is driven off the lot.
If your vehicle is declared a total loss, meaning that the payments needed to complete ownership of the vehicle exceed the value of the vehicle after the loss, this insurance will pay for the gap between what the value of the vehicle is and what is owed on it. This also applies to a stolen vehicle.
Your collision or comprehensive coverage will pay the majority of the claim, and gap will cover the rest. There is no deductible for gap insurance but your collision or comprehensive claim deductible applies.
Non-Owner Car Insurance
An NNO (named non-owner) or NO (non-owner) policy is designed for the driver who does not own a personal vehicle. The policy covers the licensed driver who is driving a borrowed or rented vehicle.
If you live in a household where someone owns a vehicle and lets you drive it, you may be covered by their insurance, but only if a premium is paid for you as well as that driver. Members of a household (family, friends, roommates) must either include you on the policy or submit a signed exclusion. When there is an exclusion, you will need to purchase an NNO policy to be able to legally drive their vehicle.
Your deductible applies to the vehicle you are driving when using NNO coverage.
Ride Share Coverage
Your personal auto policy does not cover you while transporting people for a fee. It also does not cover delivering for a fee (Uber Eats, GrubHub, InstaCart, etc.) You will need to purchase a ride share policy. If you are involved in an accident while on the rideshare app without insurance, you will be personally responsible for physical damages and injury in an at-fault loss. Additionally, you may be required to pay penalty fees to the state and the rideshare company.
This type of coverage applies while you are signed in on the rideshare app. When you are signed out, your personal coverage applies. Examples of switching to your personal policy are during break and lunch as well as travel home. Your insurance adjuster will contact the company to determine when you were signed in or out.
As with a personal auto policy, repairs to your vehicle may require a deductible.
