Driving a car is like piloting a lethal weapon. Your vehicle is capable of doing a lot of damage if you aren't careful. Even if you are a careful driver, nobody's perfect. Besides, you still have to worry about the actions of other drivers who may not be as conscientious. That's why it's important to have insurance.  You are liable for any damages that occur as a result of any auto accident that’s your fault, and the price tag can easily run into the thousands of dollars even for just a minor accident. For most people, an accident would be a financial catastrophe.  For this reason, the state of California requires you to show that you are financially responsible enough to handle of the potential consequences of driving your car. The law provides three different ways for you to demonstrate financial responsibility:

• Deposit $35,000 cash with the DMV.

• Get a surety bond of $35,000 from a licensed California insurance company.

• Get a certificate of self-insurance from the DMV if you own a fleet (more than 25 vehicles).

• Obtain an insurance policy with the following liability limits: $15,000 of bodily injury coverage per person, $30,000 of bodily injury coverage per accident, and $5,000 of property damage coverage.

Since most of us don't own fleets of vehicles or have 35 grand laying around to give to the DMV, the most common way to comply with the law is to take out a California auto insurance policy. A little bit of background information: An insurance policy is a contract in which the insurance company agrees to be responsible for your losses up to a certain limit. This limit is called the "limit of liability." In exchange for the insurer covering you up to that amount, you pay the insurance company a predetermined amount of money called a premium. Then, if you have an accident, the insurance company will pay for covered damages up to the limits of the policy.