Is California's Auto Insurance Financial Responsibility Law's Outdated? | Insurance Incorporated Skip to main content

Is California's Auto Insurance Financial Responsibility Law's Outdated?

By January 10, 2015June 8th, 2020Insurance

Under California Law drivers are required to carry auto liability  insurance in order to meet the state’s financial responsibility requirement. At a minimum, California drivers must have the following limits;

  • $15,000 for injury/death to one person.
  • $30,000 for injury/death to more than one person.
  • $5,000 for damage to property.

Auto Accidnet with Dollar Sign

These limits were set decades ago and have not been updated in years. For example , California requires that drivers carry a minimum $5,000 for damage to property. According to a USA Today article in August of 2013 the average price of a new car was $31,252. This means if a person purchased a minimum required auto liability insurance policy and rear ended an average car causing severe damage, once the insurance carrier paid out the $5,000 in damage purchased under the policy, the consumer that bought that policy would be responsible for the rest of the damage. How many consumers can afford the balance of $26,252 that they are responsible for?  The surprising thing is the cost to carry $50,000 in property damage is only a few dollars more a month yet many consumers do not know this.

The flip side of the accident scenario is if the driver cannot afford to pay the $26,252 in damages the victim can  A) sue and go after any assets the responsible party may have or B) the victims insurance carrier may  pay if the  victim carried collision coverage and if the victim did carry collision coverage the victim would incur the cost of the deductible, which is usually anywhere from $500 to $1,000 for an accident that wasn’t even their fault!

California remains one of the few states that has not updated the required auto liability minimum limits in decades.

The State of Texas requires ;

  • $30,000 for bodily injury per person,
  • $60,000 for bodily injury per accident if two or more people are injured,
  • $25,000 for property damage per accident

 

Property damage is the least worrisome part of this scenario. California only requires $15,000 for injury to another person? So if this driver hits another person and puts them in the hospital for more than a few days what do you think the cost of treatment will be?  More or less than $15,000?  What if the person is seriously injured and requires months of rehabilitation and loses time from work then what? Is $15,000 enough to cover the victims injuries, pain and suffering, loss of wages and medical bills? Will the victims insurance policy cover any of the bills? That depends on whether they purchase uninsured or underinsured motorist and what limits they purchased.

The point is these limits may not meet todays costs and as a result exposes both the driver and the victim to expenses well beyond what the minimum limits required will cover. This is why it is important to select a professional insurance agent that will explain the risks and coverage to you and tailor the policy to meet your needs. Ask what the cost of increased liability limits are. Remember this is the most important coverage you purchase as it protects you and your families assets from potential disaster. For more information contact our office.