Liability car insurance covers damages to another person from an accident that you cause. One of the most basic types of auto insurance coverage, it is also one of the few coverage options that is mandatory in California.
To put it more simply, auto liability is what covers the “other guy” and/or his property if you are at fault in a loss.
Though different states have different minimum liability requirements, California’s minimum liability limit is 15/30/5 but higher limits are not only available but strongly suggested (please see articles by our own Chrissie Claims).
What does this 15/30/5 stuff mean? Let’s say you are driving along, not paying attention, and slam into the car sitting at the stop light in front of you. There is no way around it, this accident is 100% your fault. If you have minimum 15/30/5 limits, your insurance company will pay up to $15,000 if one person is injured and up to $30,000 if more than one person is injured no matter how many that ends up being. This can also extend to your passengers but it never extends to you. You and the registered owner of the car you are driving are responsible for any amount over what your insurance company must pay out as per the contract (your insurance policy).
Your company is also required to pay up to $5000 to fix whatever property you damage which in most cases is the other guy’s car (but it’s common to receive a bill from the city for that stop sign that you knocked over).
So let’s say that three people in the newer model Toyota Camry are injured as a result of your accident. The medical bills for the first person are $10,000, the second person’s medical bills are $25,000 and the third person, who was injured the most, has medical bills of $40,000. That’s a total of $75,000 in medical bills. Your company will pay $30,000 because that is the limit you chose per occurrence if more than one person is hurt leaving you responsible to pay the balance of $45,000.
The nice Camry that you rear-ended is not a total loss but there is $15,000 worth of damage. Your company will cut a check for $5000 and you are responsible for the balance owed of $10,000.
Many people elect to purchase higher limits of liability coverage, especially if they have any assets. Typically in California, other limits include 25/50/25, 50/100/50, 100/300/100, 250/500/100, or variations of these but you get the idea.
Some people think that just because they don’t own a lot of “stuff”, they don’t need higher limits of coverage. Remember that 25% of your wages can be garnished for 10 years with an option of another 10 years if necessary to pay what you owe because you didn’t have enough liability insurance. It doesn’t matter if you’re a struggling student just starting out or a successful business owner you will be required to pay what you owe.
In summary, talk to your agent (hopefully, that’s us) about the various limits of liability coverage and the costs involved. You’ll be surprised to see how affordable it is to have proper coverage and the peace of mind that goes with it.