In most states, liability insurance is the minimum requirement for drivers to have. Despite this, most drivers don’t know enough about what liability insurance is and what exactly it covers. And it’s very important to know about this when driving in the state of California.
By understanding more about liability insurance in California, you can find the best insurance policy for you and your lifestyle. Keep reading to discover everything you need to know about liability insurance!
Our guide is going to walk you through the most important facts about your liability insurance. But we need to start with the most basic question: what, exactly, is liability insurance?
Simply put, liability insurance is designed to protect others in the event you are at fault for a car accident. If you end up causing any bodily damage or property damage, your liability insurance will help pay for those damages.
Liability insurance is the required minimum for all drivers for most states, including California. That means if you are in a car accident and someone else is at fault, then their own liability insurance will help pay for damages to you or your property.
In order to fully understand how liability insurance works, it’s important to know how fault works and how fault is determined.
Because fault determines who pays what after a car accident, it’s important to know who was at fault. But how do we determine fault after a car accident occurs?
In some cases, it may be a clear-cut matter. If you or the other driver knows who is at fault, then it will be very easy to process the insurance claim.
If it is not clear cut, though, then it will be up to the authorities to determine fault. The relevant authorities that will weigh in on this matter include police who arrive on the scene, adjusters for the insurance company, and the court of law.
While the courts would have the final say, most cases never make it that far. And that is because different insurance companies have their own rules that help determine fault. For the most part, that means you are only going to court if you or the other driver wish to dispute the findings of the insurance company.
Because the insurance company plays such a major part, the role of an insurance adjuster is very important. The adjusters for each insurance company will review evidence ranging from police and witness statements to medical reports and photos of the damaged vehicles.
If you do end up taking the matter to court, keep in mind that the court can effectively override previous findings. In other words, even if the police and the insurance companies are certain one party is at fault, a court may potentially make a different ruling.
You may think of fault as an “all or nothing” determination. But different states have different categories of fault. These categories help determine how much you or the other driver were at fault for a car accident. And the level of fault may determine the monetary amount of damages you can receive.
The first type of fault is Pure Contributory Negligence. In states that use this system, you cannot receive any damages if you were partially at fault (no matter how small that partial amount may be).
The second type of fault is Pure Comparative Fault. Under this system, the damages a party can receive are reduced based on how much they were at fault.
The final type of fault is Modified Comparative Fault. Only 33 states use this system, but they don’t all use it in the same way. Of these states, 12 use a 50% bar rule that says that a party cannot receive damages if they were at least 50% at fault. The other 21 states use a 51% bar rule that says a party cannot receive damages if they were at least 51% at fault.
Why the difference between the states? With the 50% bar rule, it is possible for two people to get in an accident and be equally at fault. In that case, neither person’s insurance will pay out. The 51% rule makes it easier to determine who is more negligent and ultimately makes it easier for insurance to pay out after an accident.
In California, you can collect damages even if you are mostly at fault. But the degree to which you were at fault reduces how much compensation you can receive.
Now you know a bit more about the role that fault plays in your insurance. But do you know what your liability insurance is designed to cover?
While we generally refer to it as one thing, “liability insurance” refers to two types of coverage. The first type is property damage liability coverage, and the second is bodily injury liability coverage.
Property damage liability is designed to pay for property damages you may cause with your car. This includes damage to other vehicles as well as damage to structures like fences and mailboxes.
Bodily injury liability is designed to pay for the injuries you cause to another person with your car. This can help pay for things like medical expenses.
For both kinds of liability coverage, the insurance company will only pay out to whatever your policy specifies. If there are costs beyond that (such as additional medical bills for the other party when you are at fault), then you will need to pay them out of pocket.
In most states (including California), liability insurance is the minimum insurance that drivers must have. But it’s important to get more than the minimum required insurance because there are certain things liability insurance just won’t cover.
For example, your own liability insurance does not offer any coverage for your vehicle. If someone else is at fault in an accident, their own liability insurance will help pay for damages. But if you get collision insurance, this pays for repairs no matter who was at fault (including scenarios where you accidentally damage your vehicle and no other parties are involved).
Similarly, liability insurance does not protect your car from things like theft, vandalism, weather, and falling trees. If you want coverage for these things, then you need to take out comprehensive insurance.
If you want enhanced coverage for medical bills and even funeral expenses, you can take out MedPay or Personal Injury Protection (PIP) insurance. These plans are popular because they also help cover your family as well as passengers in your vehicle.
Finally, you may be worried about other drivers either not having enough liability coverage or not having insurance at all. If that’s the case, you might consider taking out underinsured motorist coverage as well as uninsured motorist coverage.
We have reviewed the different types of insurance out there. However, additional insurance plans will result in a higher insurance premium. So you may be asking yourself why it would be worth it to take out more than the minimum required coverage and effectively increase your monthly bill.
The short answer is that you never know what is going to happen with a car accident in California. If you are found at fault and only have liability insurance, then you will receive no money to pay for repairs. If the damage is bad enough or your car is totaled, then you would no longer have a way to travel to work or drive around town.
Additionally, you may consider the relative safety of where you live. If you are in a high-crime area, you should consider comprehensive insurance to help protect against theft and vandalism. And if you are in an area that receives extreme weather, that same insurance will protect you from things like falling hail.
Choosing the type of car insurance you want is only one part of the equation. The other half is deciding what your insurance limits will be.
The coverage limit is the maximum amount the insurance company will pay out. So if your liability insurance has a limit of $25,000 for bodily injury, this is the maximum amount they will pay toward someone else’s injuries if you are found at fault.
Your state is going to specify what the absolute minimum limits are for your liability coverage. For example, in California, the minimum coverage is as follows:
But you may want to get a policy with higher limits. And you’ll need to decide which limits you want for optional types of insurance such as collision and comprehensive insurance.
Deciding on the right limit is something of a balancing act. The higher your limits, the higher your insurance premium will be. But if your limits are too low, you may be stuck with a nasty out-of-pocket bill for costs that go above your coverage limit.
Typically, insurance companies will describe split coverage limits with three numbers separated by slashes. These numbers may be full amounts (such as $25,000/$50,000/$25,000) or abbreviated numbers (such as 25/50/25).
Some policies, however, are “pre-occurrence” policies. Such policies will have a single number that represents the maximum amount that can be paid out for both bodily injury and repairs.
One of the most common questions we get is how much liability coverage drivers should have. But the honest answer is that individual drivers must determine the coverage that is right for them (assuming the driver is going for more than the minimum coverage required by the state).
For example, you may want to consider factors such as whether you have much in the way of savings. Similarly, you’ll want to take stock of the value of your assets, including your home, if you are a homeowner.
Why is this important? Remember, you are legally responsible for damages above your limit if you are at fault for a car accident. And once you factor in things like the pain and suffering of the other person, the damages may far exceed the minimum coverage amount required by the state.
So, one thing you may wish to consider is whether you have enough coverage to effectively protect your savings and assets. Otherwise, a single car accident could cause you to lose your home and put you in serious debt!
And after an accident, you may have medical bills of your own to pay. Taking stock of how much money you have saved can help you determine if you can afford lost wages until you are ready to return to work. If this is a major concern, you may wish to supplement your liability coverage with MedPay or PIP insurance.
One thing we always remind drivers is to check the fine print of their insurance policy very carefully. That is because the policy helps define important information about who and what is covered by the policy.
As an example, your policy will spell out whether other people are covered when they drive your vehicle. And the policy will also define whether you are still covered when you’re driving a car that is not your own.
The terms your policy will use include “permissible drivers” and “non-permissible drivers.” Permissible drivers are those you have given permission to drive your car. These drivers are typically protected by your liability coverage and collision coverage, whereas non-permissible drivers (those who do not have permission to drive your vehicle) are not covered.
In rare cases, a permissible driver may not be covered. For example, if they are unlicensed or if they are under the influence of drugs or alcohol. This is why it’s important to be careful about who you let drive your vehicle. If you know the names of people you definitely don’t want to drive your car, you can add them to the excluded drivers list of your insurance policy.
Now you know more about liability insurance. But do you know where you can find affordable plans along with the coverage limits that you need?
At Cost-U-Less, we make it easy to get the insurance plans you deserve. Now you know more about the different types of insurance that are available. But do you know where to find the insurance that is best for you and your needs?