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How much auto insurance do I need?

The amount of auto insurance each person needs varies on factors, such as what type of car they own, what assets are they protecting, and what happens if they get injured in an accident.

Property Damage Liability

This coverage will pay for the repair or replacement of the other party’s car or truck in the event of an accident.  California law requires you to carry at least $10k in property damage coverage.  If you lease a vehicle or have a loan on a vehicle, your dealership or finance company will often require you to have more than the minimum policy.  If you only carry the minimum $10k policy and hit one or more vehicles, the owner of the other vehicle can sue you and you may be personally liable for any damages caused over $10k.

I always recommend carrying a property damage policy limit of at least $50k , which will cover most vehicles on our roads today.  Of course if you hit a Ferrari or Lamborghini, it is probably not going to cover all of the damage.  You may want to carry $100k policy just to make sure you are safe.

Bodily Injury Liability

This coverage compensates the driver of the other car and its passengers in the event you get into an accident.  It also covers the passengers in your car.  In California, you are required to have a minimum bodily injury insurance policy of $15k/$30k.  That means if you are in an auto accident, your insurance company will pay out a maximum of $15k to each person who is injured in an accident as a result of your negligence, but no more than $30k total.  So if there are 5 people in the other vehicle and all of them are injured, your insurance company will only pay a maximum of $30,000.

If you have a home or other assets, you should think about carrying more than the minimum limits.  If someone is injured severely or there are multiple people injured, you could be held personally liable for any amounts over your policy limit.  I always recommend carrying at least $50k/$100k policy limits, but you would be even better off with a $100k/$300k policy, especially if you own a home.

Uninsured/Underinsured

This coverage pays for medical and funeral costs for you and your family in the event you get in an accident with a hit-and-run driver or a driver who doesn’t have enough auto insurance.  In California, one out of every 3 driver is an uninsured or underinsured motorist.  California law requires that an insurance company offer you the minimum uninsured motorist limits of $15k/$30k.  You have the right to refuse that offer; however, in doing so, you would be making a huge mistake.  You should ask your insurance agent to make your uninsured/underinsured auto insurance limits match your bodily injury limits.  If you ever get hit by an uninsured or underinsured motorist, this is money to tap into so you are not left to pay medical bills, suffer lost wages and other expenses due to the mistake of someone else.

Medpay

Medpay is an often overlooked benefit of auto insurance.  Most insurance agents do not mention it, because it does not make the insurance company much money.  Medpay is usually $1k – $10k worth of medical coverage that is available to you, should you be injured in an auto accident.  This money can cover hospital and other medical bills if you do not have health insurance.  It can be used to cover other services, such as chiropractic treatments that may not be covered by your health insurance and can also be used to cover deductibles or co-pays for health insurance.  It typically costs just a few dollars a month.  I highly recommend paying the extra few dollars for the Medpay insurance.

Collision and Comprehensive

Collision reimburses you for the full cost of repairs or replacement of your car after an accident. Comprehensive covers you in the event your car is damaged by a natural disaster, vandalism or theft. In choosing your deductible for collisions or comprehensive, the lower the deductible you choose, the more the policy will cost you.  I recommend that you always choose the highest deductible you can afford ($1,000 is fine).

Extras

Extras include rental car, towing, and glass coverage.   If the other party is at fault, the other party’s insurance company is required to provide you a rental vehicle, although you may have to pay for it up front and be reimbursed later.  If you cause the accident, then you will be out of a vehicle, unless you opt for the rental car coverage.

Another extra is towing coverage. It costs $25 or more per year on a policy.  Many new cars now come with road side assistance and towing coverage.  Or alternatively, you could buy an auto-club membership that would provide more benefits than just towing.

Auto glass is expensive and a rock flipped up by the vehicle in front of you can ruin a $500 windshield in a second.  If the cost is right, I highly recommend paying the few extra dollars for the added coverage.

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