Auto Insurance Policies Need Scrutiny

Anyone who holds a valid California driver's license should know that state law requires an owner of a vehicle to be able to show financial responsibility.

For the overwhelming majority of California motorists, being able to show financial responsibility means having a valid vehicle liability insurance policy in force. However, the state Vehicle Code does not specifically require an insurance policy as long as a person can show financial responsibility in the amounts of $15,000 per person, or $30,000 per occurrence, and $500 for damage of property.

If you don’t have a valid vehicle insurance policy, then a bond can be purchased to cover that amount or you may place a cash deposit of $35,000 with the Department of Motor Vehicles. But, why anyone might want to deposit that much cash with the DMV has, for some reason, always eluded me.

The overwhelming majority of motorists comply with the financial responsibility requirement by having valid auto liability insurance policies in force.

Financial limits required by state law are referred to as minimum-liability limits. Limits substantially in excess of those amounts are offered by insurance carriers. Given the high costs of medical care and the exposure of litigation, it is my advice that the highest auto liability limits that you are able to afford should be purchased from your insurance carrier.

The coverages that are provided for by your insurance carrier are detailed on the first sheet of your policy, which is normally referred to as the “declaration page”. I think it is safe to say that most people do not read their entire insurance policies, but at the very least, you should review the declarations page of your policy when you first receive it to ensure that the limits that are stated there are what you should have and the information is correct with regard to description of the vehicle you’ve insured.

If that information is incorrect and you have the misfortune of being involved in an accident, what you think you might be covered for and what you actually are entitled to could have substantial adverse financial consequences.

Make sure that the "named insured" lists the individual, business entity or individuals who are specifically entitled to be covered under the provisions of your policy. If you have a business with vehicles registered in its name, you will want to ensure that the correct business name is listed as a "named insured" on your declaration page.

Additionally, if you have children or other members of the household who regularly drive vehicles that are registered in your name, you will want to make sure those individuals are listed as drivers by your insurance company and that their names are listed on the declaration page as "named insured."

Vehicles that are covered on your policy also are listed on the declaration page. Generally, the vehicles that are on the policy are referred to as "described" or "insured" vehicles. Any vehicles that are owned by you and are regularly driven by you, in order to have coverage extended by the insurance carrier in question, need to be specifically listed and described on your policy.

The declaration page also contains and lists the various types of coverage that are available and usually lists the dollar amounts, which are provided as limits of the insurance liability for such coverages.

The first coverages usually deal with liability coverage and will have a category for bodily injury "per person" and "per accident." The "per person" limitation is the maximum amount of money the carrier will pay to one person who is injured as a result of the negligence of a person insured under the insurance policy.

The "per occurrence" limitation is the maximum amount of financial liability that the insurance carrier will pay for one accident, regardless of how many persons are injured.

Other points on the declaration page include:

• The maximum dollar amount for property damage paid for each accident. (Property damage could include everything from animals to fences to homes, buildings and personal property items.)
• The maximum amount of medical expenses to be paid.

Another standard coverage required by state law is "uninsured/underinsured motorist" coverage. If you do not wish to have this type of coverage, the insurance company is required to obtain a written waiver signed by you declining such coverage.

Generally speaking, uninsured-motorist coverage means just what the name implies — it provides you with coverage to ensure your damage and liability is taken care of in case the other party you are involved with has no insurance.

"Collision" and "comprehensive" insurance are additional coverages (not required by state law) that take care of losses or repairs to your vehicle if it is involved in an accident or theft. There usually is a deductible amount that applies.

Collision insurance generally provides coverage for repairs to your vehicle in case of an accident. Comprehensive coverage covers specific types of occurrences such as theft, vandalism, storm damage, falling objects and other types of damage to your vehicle that are not the result of having been involved in an accident with another automobile.

It is a good practice to not only review your insurance policy when you get it for the types of things I've referred to, but you should have a practice of keeping a copy of your current coverages available in the glove compartment of any vehicles you regularly drive.

Jim Testa is senior partner of the San Marcos-based law firm of Testa & Associates, LLP, and may be reached at 760-891-0490.