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As soon as you start driving in the state of California, you must have car insurance coverage. Unfortunately, most drivers don’t know enough about car insurance in California. This includes understanding car insurance coverage, terminology, pricing, and more.
That’s why we put together this comprehensive guide. It will bring you up to speed on everything you need to know about car insurance. And by learning these facts, you’ll become a safer driver and maybe even learn a thing or two about saving money on your monthly car insurance bill!
If most drivers are being honest, they’d say that car insurance is pretty confusing. Sure, you know who your insurance carrier is, and you know how much you pay. But do you really understand what car insurance is all about?
On the most basic level, your car insurance policy is a special contract between yourself and the insurance carrier. And this contract outlines exactly what is covered and not covered by your policy.
The premium is how much you actually pay for your car insurance each month. The premium is tied to the level of coverage you have. Generally, more coverage provides better protection, but it also drives your premium up.
Our guide will help you understand important terminology so you can understand your insurance policy. For example, you’ll learn about the different kinds of coverage and what they actually pay for. And you’ll learn about exclusions — special scenarios in which you are not actually covered by your insurance.
Your policy will spell out how long your insurance will last, with most policies lasting six or 12 months. But it is important to pay your premiums on time each month. If you stop making payments, the insurance carrier will drop your coverage right away.
Now you know the basics of how car insurance works. But what are you actually supposed to do if you are involved in a car accident?
Your first priority should be your safety and the safety of others. If necessary, you need to get to a safe location and then dial 911, especially if you or someone else is injured.
If everyone is relatively safe, then you need to exchange insurance information with the other driver. You should also contact your insurance company and see what they need you to do to start a claim.
What happens next will be dictated in part by who was at fault for the car accident. To better understand how this works, let’s review the important insurance terms you need to know.
The following list is not comprehensive. But it does cover the most important vocabulary surrounding your car insurance policy. And understanding what these terms mean can help you out, especially when you need to file a claim or even call your carrier for additional information.
When you first take out your policy, your insurance premium will be a certain amount. But over time, you may notice that the premium has gone up. To understand your new price, it’s important to understand the different reasons your rates may increase.
To start, there are multiple factors that influence your current premium. Our guide will explore these factors in detail later, but you should know that some of these factors (including your age, your marital status, and where you live) change over time. And these changes can potentially cause your premium to go up or down.
Aside from those factors, your premiums mostly go up after you renew your policy. This is because your insurance carrier will take the time to review your driving record. And certain driving behaviors are likely to cause an increase in your premium.
What are these driving behaviors? The list includes speeding tickets, car accidents, and assorted other driving violations. All of these make you seem like a riskier driver, and the higher insurance premium reflects that fact.
In some states, a dip in your credit score can lead to a higher premium, but that is not the case in California. And the act of filing is likely to drive the cost up, even if you weren’t at fault. Finally, a DUI or DWI conviction can significantly drive your rates up and require you to file an SR-22 with California.
We have reviewed the many reasons your insurance premium may increase. Fortunately, there are a few ways you can bring your rates down.
The first way is to simply shop around for rates from different companies. If your premium from your current carrier has gotten too high, you may be able to get a better deal from another carrier.
In some cases, you can get an insurance discount by completing an approved driving course. And the insurance carrier likely offers their own discounts for things like safe driving records and installing anti-theft devices; be sure to contact your carrier to discuss possible discounts.
Finally, if you’re driving an expensive car, you should consider downgrading to something simpler. Not only can this cause the premium for your current coverage to decrease, but you may be able to afford lower coverage amounts when you don’t have an expensive car to insure.
Speaking of coverage, it’s important to understand the different types of insurance coverage. Each coverage has a different function, and it’s important that you understand what is covered and what is not covered.
Property damage liability coverage helps pay for any damage you cause to someone else’s car or property. If you are found liable for the accident, this liability insurance helps pay for it.
Bodily injury liability coverage helps pay for any injuries you cause to other people. If you are found liable for the accident, this kind of insurance will pay for things like their medical bills.
While these two types of liability coverage are technically separate, many drivers and even carriers will refer to them collectively as “liability insurance.” In most states, you must have liability insurance to cover damages you cause, though the minimum coverage amounts may vary from state to state (here, for example, are the minimums for California).
Collision insurance coverage is an optional type of insurance that helps pay for any repairs to your vehicle after an accident. This type of insurance pays out regardless of who is at fault.
Comprehensive car coverage helps protect your car against damage from things other than car accidents. For example, damage from a falling tree or hail would be covered by comprehensive coverage.
In most states (including California), having these three types of coverage means you have “full coverage.” You may also want to take out MedPay coverage, which helps pay for any medical or funeral expenses related to the car accident. This type of coverage protects the driver, driver’s family, and others who may be in the vehicle.
As we noted before, California only requires you to have liability insurance. And it may be tempting to stick with minimum coverage to reduce your monthly premium. However, we generally recommend you get more than the minimum coverage for a variety of reasons.
For example, liability coverage doesn’t do anything to protect your vehicle. If your car is seriously damaged or even totaled, you would have to either buy a new car out of pocket or try to find your way around town with no vehicle.
Similarly, your own liability insurance will not do anything to help you pay for medical bills. If the other driver is underinsured or even uninsured, then you could be stuck with some hefty medical bills.
Finally, cars are damaged by things other than accidents all the time. If your car is vandalized or even stolen, then liability insurance cannot help you. But comprehensive insurance can help get you back on the road.
Sometimes, the best advice is the simplest advice. And when it comes to your insurance policy, the best advice we can offer is to read the policy carefully from top to bottom. And if you have any questions, you need to reach out to your insurance carrier right away.
As an example, your coverage amounts dictate the maximum amount your insurance will pay out when there is a qualifying event. If you don’t read the fine print, you may not know that you have insufficient coverage to pay for your expensive new car if it should be damaged or totaled.
If nothing else, reading the fine print means you won’t run into any surprises when you go to file a claim. Take it from us: that’s the last scenario where you want to encounter the unexpected!
Another reason you need to read the fine print is to answer a simple question: Who is protected by your insurance plan and who is not?
For example, most car insurance plans will extend coverage to the driver. This obviously includes the owner of the car, but it may include family members and even friends the driver loans the car to.
However, there is no guarantee your insurance plan offers this kind of extended coverage. That’s why you need to read your policy and verify who is covered before you let anybody drive your car!
Earlier, we touched on some of the different factors that may influence the cost of your insurance. Now, we’re going to get into a bit more detail about what these factors are and what they mean for your own insurance policy.
Unfortunately, one of the biggest factors is your zip code. If it is a high crime area or if many people in the area file insurance claims, your own carrier may consider living there to be a risk.
The kind of car you drive also affects how much you pay. As you might imagine, a sporty and expensive car is going to command a higher insurance premium than the family minivan or a used car.
Age is a factor in your insurance cost, but it may just work in your favor. Younger drivers always have higher insurance premiums, but prices usually start to get lower by the time you turn 25.
Your driving history is a big factor. If you go a long time without speeding tickets or car accidents, your premium will stay lower, and you may even qualify for a safe driving discount. But things like tickets, accidents, and especially DUI/DWI convictions will drive your premium up.
In many states, gender and credit history can affect your insurance premium. But in California, insurance companies are not allowed to take those factors into account.
A common question drivers have is, “how much car insurance do I really need?” Unfortunately, only you can determine which types of insurance and coverage amounts are best for you, your vehicle, and your lifestyle.
Mostly, this decision comes down to how high your coverage is and how low your deductible is. Like other types of insurance, car insurance requires you to pay for your deductible amount before it pays out. If you have a deductible of $1,000, for example, then insurance may pay absolutely nothing for run-of-the-mill fender benders.
And the coverage amount dictates the maximum amount the insurance carrier will pay out. While low coverage amounts can keep your premium down, they also mean you could be stuck with a major bill after a car accident.
Consider factors like the value of your car, the cost of medical care, and the safety of your area to find the car insurance types and amounts that work best for your needs.
Now you know everything you need to know about car insurance. But do you know where to get the protection you need at a price you deserve?
At Cost-U-Less, we offer different types of insurance at plans that are affordable and fair. Get started with a free quote online, visit us at an office near you, or call us at (800) 390-4071 for a quote.
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Freeway Insurance Services America, LLC (CA License #6002326)
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