“I have full coverage!”
We hear this all the time when a new client first contacts us after a motor vehicle accident.
There are many types of auto insurance policies available, and there is no universal definition of “full coverage” – it doesn’t really exist. Generally, most people that think they are “fully insured” are saying they have liability, collision and comprehensive coverage.
The important thing is to decide which policies fit your needs:
California is an “at fault” state – the person who causes the accident is responsible for the damages. And if another person is injured in an accident that you caused, your liability coverage will pay for that person’s bodily injury claim. Your liability policy will cover the injured person’s medical bills, general damages (“pain and suffering”, etc.), and so on. It will not cover your injuries in this scenario.
All private vehicles must currently carry a minimum “15/30” policy. This means $15,000 per person and $30,000 per occurrence for bodily injury claims. (California Vehicle Code Section 16056).
In other words, if you cause injuries to others in an auto accident, your liability policy will cover their bodily injury claims up to $15,000 per person, but only up to $30,000 in total for the entire accident, regardless of how many people were injured.
This becomes a problem when someone is severely injured, or if there are multiple vehicles involved. In those cases, one person’s claim can easily exceed $15,000, or $30,000 is not enough to cover everyone who was injured. The at-fault party would be personally (individually) liable for the rest in excess of the policy limits.
Liability coverage will also cover damages you cause to someone else’s property. This is typically another car. The state requires a minimum $5,000 policy. This means your liability coverage will pay for the damages you cause to property (for example, the cost to repair the car you rear-ended), but only up to the policy limit of $5,000.
This also becomes a problem when you cause damages to a very expensive car, or multiple cars. The “policy limit” of $5,000 is per accident, meaning, all the cars that you damaged in one accident must share the $5,000 policy. The at-fault party would be personally (individually) liable for the rest in excess of the policy limits.
This policy covers damages to your car when it is involved in an accident. It does not matter whether or not you caused the accident. It only pays for damages to your car, and not for property belonging to others. There may or may not be a deductible, depending on your policy terms. If you are financing your vehicle (lease or loan), chances are that your lien holder or financing company requires you to purchase collision coverage. Your lien holder or financing company may cap the maximum deductible you are allowed to have.
Collision coverage will typically only pay up to the fair value of your vehicle if the costs of repair are higher. This means the car is “totaled” or a “total loss”, because the cost to repair the vehicle exceeds its value. In that case, it does not make sense to fix a car worth $2,500 for $5,000. You can take the $2,500 and buy another similar car. If you have a deductible, that amount will be reduced from the “total loss” amount.
It also does not matter how much you have remaining on your loan or lease. You are not entitled to what you “owe” on the car, but what it “was worth before it was in the accident”. You may owe more on your loan than what your car is worth when it is “totaled”. In that case, you are generally responsible for the difference, unless you had purchased “gap insurance”.
This policy covers damages to your car that are caused by things other than a collision. Examples are storms, a hit-and-run on your parked car, or if someone breaks into your car. Exactly what is covered under your policy will vary by insurance carrier. There may or may not be a deductible, depending on your policy terms. And if you are financing your vehicle, this policy is also probably required.
Medical Payments or “Med Pay” Coverage
Yes, you can buy optional coverage for “medical payments” on your auto policy. “Med pay” covers your medical bills up to the policy limit, irrespective of fault. Depending on your policy terms, it may also cover your passengers or other drivers of your car. It may even cover an accident when you are walking to or from your car, or when you are in another person’s car.
“Med pay” is beneficial even if you have health insurance – your health insurance may not cover all your medical bills. For example, your health insurance may not cover chiropractic care or dental work. It can also cover out-of-pocket expenses, like your co-pays or medication.
Uninsured Motorist Coverage
“Uninsured Motorist” or “UM” coverage is also optional. What happens when you are in an accident and the person who caused it does not have auto insurance? Your UM policy will cover your damages.
If you do not have UM coverage, your only other option would be to go after the other driver personally to recover your damages. But this is usually not a practical solution, because you will not be able to actually collect any judgment against the other driver.
Most insurance carriers offer both UM coverage for bodily injuries, as well as property damages. You can purchase one or the other, or both.
Underinsured Motorist Coverage
This policy works just like uninsured motorist coverage, but it kicks in to cover your damages when the other driver who caused the accident does not have enough insurance. For example, the other driver may have a $5,000 liability policy for property damages. The cost to repair your brand new vehicle may be much higher. Your underinsured motorist coverage will cover the rest of your repairs, up to your policy limits.
Underinsured motorist coverage can be purchased for both bodily injuries, as well as property damages.
Depending on your insurance carrier, “UM” coverage might include both “uninsured” and “underinsured”. Other carriers require you to purchase these policies separately. So it is important to know how your carrier defines “UM”.
Rental and Emergency Road Side Coverage
These two policies are also optional. Rental coverage pays for your rental vehicle while your car is being repaired. Emergency road side coverage pays for towing and labor.