Auto Insurance

States have added an additional responsibility to owning and driving an automobile, known as financial responsibility law under the vehicle code. In other words, most state governments have made it mandatory for people who own or drive, to be able to pay for the accidents they cause. Thorough the financial responsibility law under the vehicle code, governments rolled out comprehensive auto insurance policy provisions, which discuss everything related to an insurance including consumer’s rights and responsibilities, eligibility for insurance, shopping & comparison parameters, and additional coverage.

This financial responsibility, as mentioned above, can be met by purchasing automobile liability insurance, which is the preferred method among four different methods to meet the financial obligation under the vehicle code.

In case of automobile liability insurance, the Department of Insurance inside State Governments have prescribed minimum limits that you must purchase in order to own or drive within that state. States have their own prescribed limit and drivers/owners within that state must have at least the statutory limits of minimum liability insurance coverage. The basic structure of the minimum automobile liability insurance coverage is as follows:

Minimum Prescribed Limits of Liability

Though the minimum prescribed limit varies from state to state, the following is an example of minimum limits required in California.

Bodily Injury Liability (BI)

  • $15,000 for death or injury of any one person, any one accident.
  • $30,000 for all persons in any one accident.

Property Damage Liability (PD)

  • $5,000 for any one accident.


The above limits mean, if you are held responsible for any auto accident, BI liability covers your liability to others for injuries to them. Similarly, PD liability covers your liability for damage to someone else’s property. A policy with BI of $15,000/$30,000 and PD of $5,000 will pay as follows:

  • $15000 maximum for one person’s injuries
  • $30000 maximum for all injured in one accident
  • $5000 for property damage

Do You Need Higher Limits?

Auto liability insurance covers only the injuries and /or damages you caused to other person. Your own damage is not covered under minimum liability coverage. However, you may be personally held liable to pay damages over and above the policy limits; it is advised that you consider purchasing liability insurance with higher limits than that of the minimum required by the law. With the increasing cost of medical and healthcare facilities and car repairing, it is judicious to consider purchasing additional coverage. However, the additional coverage is not mandatory like minimum liability coverage. Additional coverage is totally your decision, may based on your own assessment of risk involved. Some of the additional coverage examples are collision and comprehensive coverages, Medical Payments, and Endorsements/Riders.

Consequence of ignoring this law

Driving without minimum liability coverage is illegal. Moreover, in case of any accident caused by you which is not covered by insurance, could bring punishment up to suspension of your license and you may be personally held liable to pay all damages.

When Must You Show Proof of Insurance?

All the motorists are legally required to produce proof of automobile insurance before the department of motor vehicle renews the vehicle registration. The auto insurance policy provisions also require that all motorists show proof of insurance when asked by a police officer for traffic violations. Those who can’t show proof may be subject to fines and other penalties.

Proof of financial responsibility i.e. auto liability insurance must be shown in the following conditions:

  • Registration or renewal of registration of vehicle
  • Accident
  • Inspection of vehicle
  • Required by a law enforcement officer

What is the proof of Insurance?

Insurance companies send a certificate or a proof of insurance card, mentioning details of automobiles & drivers covered, policy number and expiration dates.

What if I Can’t Find a Company That Will Insure Me?

There are situations when people are unable to find a suitable auto insurance company that can insure them. In these cases, one should contact the Department of Insurance since it is this department’s responsibility to see that no one should be denied the opportunity to purchase minimum liability insurance coverage. Usually, departments of insurance make sure that you get liability coverages through some special plans developed with the help of insurance companies licensed to operate in that particular state. These plans are designed for drivers who do not qualify as good drivers and are unsuccessful in obtaining insurance from auto insurance providers.

However, the rates used by the special auto insurance plans are the same irrespective of insuring company. Also, most of these plans have installment options i.e. if you can’t pay the complete premium in one payment; you will have the option to pay certain amount every month of six-month, as the case may be. Usually, no broker’s fee is charged in these insurances.

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