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Types of Coverage

Even though California auto insurance contracts are supposed to written so that the average person can understand them, the standard auto insurance contract can appear to be written in Ancient Greek to the uninitiated. However, it's important to understand what the different coverages listed on the contract are. Your California auto insurance contract is a legally binding document that describes what your insurance company will and will not be responsible for paying in the event of an accident. Insurers generally offer several types of coverage in California. Here is a brief description, in plain English, of what they are and what they do.


Liability coverage

Your liability coverages cover the damages that other people suffer in an accident that's your fault. Liability coverage is subdivided into two types of coverage: bodily injury liability, often abbreviated as BI, and property damage, often written as PD. If you are in an accident that is determined to be your fault, bodily injury liability will cover the other person's medical bills and funeral expenses, if necessary. Bodily injury liability generally has two limits: a per person limit, which is the maximum amount your policy will pay for a single person, and a per accident limit, which is the maximum amount your policy will pay per accident. If the other person’s medical bills are higher than your limits, don’t think you are off the hook. The other person or the other person's health insurance company can sue you to try to collect the remainder of the damages. That’s why it’s a good idea to carry more than the minimum limits. Property damage liability pays to repair or replace the property you damage in an at-fault accident, whether it's another person's vehicle, a guard rail, or a lamp post.


Uninsured and underinsured motorists coverage

Usually abbreviated as UM/UIM, uninsured and underinsured motorists coverage will pay for your medical expenses if you are hit by someone who does not have an auto insurance policy. This coverage also protects you if you are hit by someone who is insured, but who does not have high enough liability limits to completely pay for the damage they cause. Additionally, this coverage will pay for your damages if you are involved in a hit and run, as long as you call the police immediately afterwards. The highest amount of UM/UIM coverage you can take out for property damage is $3,500. You don't have to have UM/UIM coverage at all, but if you don't want it, the state requires you to submit a signed, written request to your insurance company to have it removed from your California auto policy.


Medical payments

This coverage often appears on your California insurance policy as "Medpay." Medical payments coverage provides a set amount of coverage for anyone riding in your vehicle to pay for medical expenses as a result of an accident. This coverage kicks in any time there is an accident, regardless of which driver is at-fault.


Comprehensive coverage

On your California auto insurance policy, this coverage is often abbreviated as "Comp," or sometimes "OTC," for other-than-collision. Comprehensive coverage covers any damage that occurs to your vehicle as a result of something other than an accident. For example, if your car is stolen, that's considered a comprehensive loss. Damage from weather, fires and earthquakes is also covered under comprehensive coverage. With comprehensive coverage, you agree to pay a deductible yourself, and then the insurance company picks up the rest of the cost. The higher the deductible you choose, the lower your premium will be. Comprehensive and collision coverage will only pay up to the actual cash value of your vehicle, which is usually quite a bit lower than what you paid for it on the car lot. This is because your vehicle goes down in value as you drive it, and the insurance company only wants to reimburse you for the amount the car was worth at the time of the loss. Most loan and lease companies require you to carry both comprehensive and collision coverage on your vehicle.


Collision coverage

Collision Coverage pays to repair or replace your vehicle if you are involved in an at-fault accident. If you don't have collision coverage, you are responsible for the cost of repairs yourself if you are in an at-fault accident. If the other party is at fault, the cost is paid by their insurance company, under their property damage coverage. With collision coverage, you agree to pay a certain deductible before the coverage kicks in. The higher the deductible you agree to, the lower the premium. Collision coverage is not mandated by the state, but if you are making payments on your car or leasing it, the bank will require that you carry it to protect their interest in the vehicle. If you are required to carry comprehensive and collision coverage as a condition of your loan and you don't do it, the bank will take out "force-placed" coverage on the vehicle and make you pay for it as part of your loan. Alternately, they may repossess your car. Force-placed insurance coverage is usually extremely expensive, so make sure that your insurance policy meets the requirements of your loan or lease.


Towing coverage

This coverage pays a set amount to reimburse you for the cost of having your car towed, or for labor costs such as hiring a locksmith. It does not pay for repairs to your vehicle.


Rental reimbursement

Rental reimbursement pays a certain amount toward getting a rental vehicle if you have to file a comprehensive or collision claim.

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