How To Shop For Car Insurance

The attorneys at Baker and Oring, LLP, do not often have the opportunity to discuss insurance coverage with clients until after an accident has occurred. By then the damage is done. We do our best to educate our clients about how to protect themselves against future losses, but of course, after an accident occurs, it is too late to change coverage for that accident.

With that in mind, we hope you will find the following information helpful. Please review this informal guide and compare our suggestions to your own current policy. Then promptly call your agent to make changes as appropriate:

Read below to find out why we believe Uninsured/Underinsured Motorist Coverage is the most important element of your insurance policy.

Automobile Insurance Coverage

Everyone who drives a motor vehicle must have automobile liability insurance. That is the law in California. The required minimum liability coverage which must be carried is commonly referred to as 15/30/5—meaning up to $15,000 coverage for each person injured in a covered motor vehicle accident or $30,000 coverage apportioned among any number of people injured in a covered accident and $5,000 total Property Damage coverage for damage you may cause to any vehicle or vehicles damaged by you in a covered accident.

Ideally, everyone who drives a car in California would have enough insurance to cover any damages that they might cause or suffer in an accident. Unfortunately, in reality automobile insurance is an expense that is often given a low priority when budgeting. Additionally, the money spent on car insurance may not be well apportioned among the types of coverage and deductibles offered. This is because consumers typically do not have enough information to make informed decisions about the coverage they are buying, and the agents who sell auto insurance may have conflicts of interest that prevent them from giving unbiased advice.

All too often the insurance carrier will deliberately sell the consumer a policy that better protects the carrier's interests than those of the insured. Some carriers simply will not sell the types and amounts of coverage insurance consumers need to properly protect their interests.

Beware of agents who offer policies issued by substandard or non-admitted insurance carriers and/or insurance carriers who sell only the minimum limits of coverage required by California law. When shopping for auto insurance, you should not assume that the more established insurance carriers would be significantly more expensive than the substandard carriers. Compare quotes before you buy. The policy you purchase could make all the difference if you or your family members are involved in an accident.

Property Damage Deductible

One of the most common mistakes we see our clients make is spending more of their insurance money to keep their Property Damage Deductible low, while spending less on more important coverage, like Liability and Uninsured/Underinsured Motorist coverage. We think it is more important to protect your assets, income, and health than it is to carry a low Collision deductible.

We suggest carrying a high deductible for Property Damage (also known as Collision) deductible. In effect, this is self insuring for the rare instance where you are at fault in an accident. This reduces the premium dollars you spend overall for this type of coverage, thereby enabling you to spend your money on coverage areas like Bodily Injury Liability and Uninsured/Underinsured Motorist coverage—which provides greater benefits should you be involved in an accident. Low deductibles, as a practical matter, are often a waste of money. For example, damages from a minor "fender bender" which does not reach the level which must legally be reported, will often be paid out of pocket due to fears that reporting the claim may have an adverse effect on your insurability or future premiums charged by the insurance carrier. Unless otherwise required by your auto lease or finance documents, your Property Damage Deductible should be at least $1000, and perhaps higher, depending upon the value of your vehicle and your ability to self insure for minor damage.

In fact, if your vehicle is not worth much, it may not make sense to carry any Property Damage or Collision coverage at all. If your vehicle is worth less than $5,000, the premiums you pay over a few years might equal the value of the car. It is far better to spend the money you save on increasing your coverage for the more important Bodily Injury Liability and Uninsured/Underinsured Motorist coverage.

It is important for you to know, however, that if you elect a high Property Damage Deductible, you should carry a rider for Uninsured Motorist Property Damage Deductible Waiver (UMPD Waiver). This ensures that if your vehicle is damaged in an accident caused by an uninsured or underinsured motorist, your Property Damage Deductible will be waived and you will not have to pay the deductible amount when your vehicle is repaired.

You may wish to carry a lower deductible for Comprehensive coverage, to covers things such as falling trees, fires, floods, road hazards, vandalism, etc. This type of coverage is typically less expensive than Property Damage coverage and claims against your Comprehensive coverage typically do not affect your insurability or premiums so there is no disincentive to making such a claim.

Property Damage Liability Coverage

As stated above, the minimum coverage required by California law for Property Damage Liability is a total of $5000 for all property damage caused by you in one accident. If you are responsible for damage to more than one other vehicle, that amount will be apportioned among all other vehicles with damage that you caused.

Of course, if you cause damage in excess of the amount of coverage you purchased for Property Damage Liability Coverage, you may face significant legal and financial problems because of the accident.

Not everyone can afford to spend more than the minimum required by law for this coverage., For those who can afford it and wish to obtain indemnification through an insurance policy for physical damage they may cause to someone else's property, increased Property Damage Liability coverage limits are appropriate. Consider that even the least expensive vehicles today typically cost at least $10,000 and many vehicles sharing the road with you may be worth more than $100,000. If you accidentally destroy one of those vehicles, you may find yourself facing a substantial claim for reimbursement for damage to someone else's property. Even if the other party's insurance company covers the damages, it is likely that their insurance carrier will subrogate (sue) you to recover the amounts they have paid out in excess of your Property Damage Liability coverage limit. Additionally, you may face a claim for tax and license fees on the destroyed vehicle, loss of use of the damaged property, and rental car expenses - as well as diminution in value if the damage to the adverse vehicle reduces its market value even after a proper repair.

Your auto insurance budget dictates the amount that you decide to spend on Property Damage Liability coverage, but if your budget allows, we urge you to purchase Property Damage Liability coverage in an amount in excess of the minimum required by law. You may find that a $100,000 policy does not cost much more than a $25,000 insurance policy for Property Damage Liability coverage. Increased coverage of this type may be more affordable than you might think due to the actuarial calculations made by the insurance carriers. .

Bodily Injury Liablity Insurance Coverage

Bodily Injury Liability Insurance covers the injuries and related damages you may cause to another person or persons due to a covered accident. Related damages include medical expenses, lost earnings or earnings capacity, disfigurement, loss of consortium, and pain and suffering.

You should consider your net worth and earnings when deciding how much Bodily Injury Liability insurance to carry. If you are responsible for injuries suffered by another person or persons, you may be sued for the full amount of the damages suffered by the other party. It is prudent to match insurance coverage to your net worth and earnings capacity to protect your family's financial well being while ensuring that you honor your financial responsibilities to someone to whom you may have accidentally caused harm.

Umbrella Coverage

You may be able to save money while purchasing increased limits of liability coverage by purchasing an "umbrella" policy that you can attach to your automobile Bodily Injury Liability Insurance policy. An umbrella (or excess coverage) policy is typically less expensive than a straight Bodily Injury Liability policy. So, you might purchase an Automobile Bodily Injury Liability Coverage policy for $100,000 and attach it to a $1,000,000 umbrella policy that pays claims over $100,000 up to $1000,000 for less than the cost of a $1,000,000 Automobile Bodily Injury Liability Coverage policy.

An umbrella policy is typically purchased as a rider on your homeowner's or renter's insurance policy and provides excess coverage (usually in increments of $1,000,000) for all claims for damages in excess of that covered by the underlying policies. These policies are usually not expensive relative to the protection they provide.

Some insurance carriers will sell you a very inexpensive rider that attaches your umbrella policy to your Uninsured/Underinsured Motorist Coverage policy (see discussion below). This is the single best investment of your insurance premium dollars that you can make and one you should seriously consider. Not all insurance carriers offer this coverage. Feel free to contact our offices for help in finding an insurance carrier offering this coverage if you need assistance.

Uninsured/Underinsured Motorist Insurance Coverage

Uninsured/Underinsured Motorist Coverage is the most important part of your policy because it provides protection from injuries and damages caused by all motorists—including the least responsible and most dangerous drivers on the road—who are likely to have little if any insurance coverage of their own.

If you are involved in an accident caused by a motorist who has no insurance or has inadequate insurance to cover the harm you or your family has suffered, then your Uninsured/Underinsured Motorist Coverage compensates you for your damages. Buying an Uninsured/Underinsured Motorist Coverage policy helps ensure that any injuries to you or your family caused by a fellow motorist will be compensated up to the limit of the coverage you purchased.

Most insurance companies will sell you Uninsured/Underinsured Motorist Coverage in an amount equal to the amount of liability insurance you choose to purchase. In some cases, they will sell you a policy in excess of your Bodily Injury Liability Coverage limit. Despite the value to the insurance consumer of this important insurance coverage there are, however, insurance carriers selling standard policies that include only $30,000 per person and $60,000 per accident of Uninsured/Underinsured Motorist Coverage as a maximum limit available—regardless of the amount of coverage purchased for liability coverage. If an agent offers you a lower coverage limit for the Uninsured/Underinsured Motorist Coverage than for the Bodily Injury Liability Coverage, you should immediately find another insurance agent. That agent does not know what he/she is doing and/or is putting the insurance company's interests ahead of yours. In either case, that agent is not someone you should trust to provide this important service to you and your family.

Uninsured/Underinsured Motorist Coverage provides you and your family with compensation for injuries suffered in all motor vehicle accidents—whether you or your family members are using a vehicle or are injured as a pedestrian, bicyclist, etc.—and this coverage provides reimbursement for medical expenses and compensation for pain and suffering, disfigurement, loss of earnings or earnings capacity both present and future, and loss of consortium. You can see how important this part of your policy may be in the event of an accident. The good news is that this coverage is a relatively inexpensive part of your automobile insurance policy.

Some people are afraid to make a claim against their insurance companies because they are concerned that the insurance carrier will raise premiums or cancel the underlying policy. Making a claim against your own Uninsured/Underinsured Motorist Coverage, however, is not an act for which your insurance company can retaliate against you by raising rates, surcharging or canceling your coverage. Any such action by your insurance carrier would be an act of bad faith.

You should consider buying an umbrella (excess) liability policy, which may be purchased as a rider on your homeowner's or renter's liability coverage policy. This umbrella may be attached to your Uninsured Motorist Coverage for a small additional premium. A $1,000,000 umbrella policy attached to your Uninsured Motorist Coverage policy would be the equivalent of guaranteeing that every other motorist on the road is insured for $1,000,000. With this policy in place, you and your family could be compensated up to that amount through your own Uninsured Motorist Coverage for any injuries and damages caused by any those drivers..

Aggregation Of Policies

Your insurance company may offer significant discounts when you give all your insurance business to that carrier. You should ask your insurance agent about how bundling your homeowner and auto policies can save you money.

The foregoing is not intended as an all-inclusive analysis of auto insurance policies or purchasing issues. If you have any questions about your auto insurance policy, or if you would like us to review your policy and make suggestions about improving your coverage, you can contact us at (310)822-3377. Baker and Oring, LLP, is here to help you.

This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. [ Sitemap ]

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