Frequently Asked Questions
"Am I Required To Have Auto Insurance?"
Most states have mandated that motor vehicle owners carry some minimum level of liability insurance. This provides protection for other people and their personal property, as opposed to collision and comprehensive insurance which provides protection for you, the car owner.
Things to consider:
- The mandatory levels of liability insurance vary from state to state and are typically reflected as 15/30/5 (This happens to be the minimum for California). The first two numbers, 15/30 refer to bodily injury liability limits, on a per person basis (maximum $15,000) and on a per accident basis (maximum $30,000). The third number in 15/30/5 refers to property damage liability limits per accident. It is capped at $5,000.
- The mandated limits are “minimum” only and are not to be construed as being adequate. Adequacy is a matter that differs from person to person and is best analyzed from the standpoint of what a person is trying to protect with the coverage.
- It is important to be aware that the stated policy limits, whether they are state mandatory minimum or more substantial, are limits covered by the insurance company. If it is determined that liability exceeds that which is covered by the policy, the policyholder assumes responsibility for the balance of the liability.
Steve and Belinda are California residents and have the state mandated minimum levels of liability insurance for their autos (15/30/5). They were at fault in an accident that caused both personal injury and property damage to the two victims. Both victims required varying degrees of medical treatment and their car was a total loss. The medical and related costs for each of the victims were $18,000 and $7,000 and the value of the totaled vehicle was $10,000. Steve and Belinda were unhappy when they learned they had to come up with $8,000 of their own funds to settle this matter. After it was explained that, per their policy, the maximum liability for each person was $15,000 and the maximum property damage per accident was $5,000, they understood why they were responsible for the following: $3,000 difference in medical and related costs for one of the victims; nothing for the second victim’s costs of $7,000, which were totally covered; and that the $10,000 totaled vehicle was covered by the insurance company up to the policy limit of $5,000, leaving the remaining $5,000 as their responsibility.