San Diego: What You Need to Know About Buying Car Insurance
Times are tough in San Diego and those tough times are affecting drivers and their ability to purchase insurance.
Even in good times, drivers often try to save as much money as they can by buying cheap insurance. We have all seen the commercials. "Call our insurance brokerage and we'll get you the best price for insurance. We'll save you money!" However, policy price is only one factor that drivers should consider when buying insurance.
A second factor, and really the reason why you buy insurance, is to protect you and your family. Car insurance does that in two ways. First, the insurance policy protects you in the event that you are at fault and cause a car accident. This is called "third party coverage" because the injured person is not part of the insurance contract between with you and your insurance company. Third party coverage by law MUST include coverage for "bodily injury" claims, i.e., claims of physical injury, and property damage claims to pay for car repairs.
Under California law, all drivers must carry car insurance with limits of at least $15,000 bodily injury coverage per person, $30,000 bodily injury coverage per accident, and $5,000 property damage. These limits have been on the books for years and have not adjusted for inflation.
As you can imagine, these limits are not sufficient to pay for all but the most minor car accidents. With the cost of medical care today, it is very easy for medical treatment alone to exceed $15,000--let alone the compensation necessary to pay for pain and suffering or for lost earnings while the injured person recovers. And any significant auto body repair can easily exceed $5,000.
Needless to say, possessing a minimum car insurance policy doesn't do anyone much good.
The other way that insurance protects yourself and your family is through "first party coverage", meaning coverage that protects you whether or not you were at fault for causing the accident. First party coverage is not required by law. It includes coverage for under-insured motorist coverage, uninsured motorist coverage, and medical payments for medical treatment.
These coverages are very important, but particularly in this down economy. As more and more people are laid off or worried about making ends meet, they will cut back on expenses such as car insurance. This means more drivers driving with minimum car insurance policies, or no insurance at all. As a recent news story stated, California has the 7th highest rate of uninsured motorists in the country at 18% of the state's drivers are driving without car insurance. That rate is expected to only increase as unemployment rises.
If a driver's minimum car insurance policy is not enough to pay for the damage caused by a car accident, often the only recourse you have is your underinsured motorist coverage. Say the other driver has a $15,000 insurance policy and you have $100,000 in underinsured motorist coverage and you have incurred $25,000 in medical expenses as a result of the crash. Without under-insured motorist coverage, you'd be limited to a recovery of $15,000 and have to find a way to pay the remaining $10,000 of your health bills. However, with under-insured motorist coverage, you can collect the $15,000 payment from the other driver's insurance company and up to $85,000 of additional payments from your own insurance company ($100,000 policy less $15,000 paid).
This illustration is all the more obvious when we discuss uninsured motorists. Although California law requires every driver to possess car insurance, you can get a driver's license or drive a car without it. It's only when a driver gets caught that the criminal penalty for driving without insurance catches up to them. San Diego has a larger number of uninsured motorists compared to other communities. This is only going to get worse with the economy. If the other driver does not have insurance, they most likely will not have enough assets or income to pay your damages. Therefore, you must rely on your uninsured motorist coverage to pay for your medical bills and to replace income.
So what does this mean when you buy car insurance? Buy the highest bodily injury limits you can afford. You do this not only to protect yourself against third party claims when you're at fault but because insurance companies will only sell you under-insured and uninsured coverage up to your third party bodily injury limits. So, think of how you'd like to be treated as you're pricing third party claim coverage. The under-insured and uninsured coverage is cheap so the vast majority of your policy cost will be associated with your third party coverage.
Also, particularly if you don't have health insurance, make sure you have some medical payment coverage. Most insurers sell policies with $2,000 or $5,000 medical payment coverage, but you can get more coverage if you wish.
