Auto Insurance Guide
What is Automobile Insurance?
Automobile insurance is simply a contract that helps pay
for certain types of financial losses or obligations resulting
from the use or ownership of an automobile. To obtain this
contract (insurance policy), you pay a specified amount of
money called a premium. In return for the premium paid,
the insurance company agrees to pay certain expenses and
legal liabilities depending on the terms of the insurance policy.
Having the right insurance coverage may prevent you from
suffering a large financial loss in the event of an automobile
accident.
The responsibilities of owning and driving an automobile
include following the financial responsibility laws under the
Vehicle Code. The most common way to satisfy the financial
responsibility for operating an automobile in California is by
purchasing automobile liability insurance.
If you choose to meet your financial responsibility by
purchasing liability insurance, the DMV outlines minimum
limits that you must purchase under Section 16451 of the
Vehicle Code.
When Must You Show Proof of Insurance?
The Legislature passed a law requiring motorists to produce
proof of insurance before the DMV renews the vehicle
registration. The new legislation also requires motorists to
display proof of insurance when they are stopped by a police
officer for traffic violations. Drivers who can’t do so may be
subject to fines and other penalties.
Proof of financial responsibility must be shown when you:
• Are asked for it by a law enforcement officer;
• Have an accident;
• Register your car or renew its registration; or
• Get your car inspected
Why Should I Shop Around
for Automobile Insurance?
Each insurance company is allowed to
calculate its own rates based on its
past loss experience and expenses.
Since each company’s experience
will differ, even within the same
geographic area, the rates will
therefore differ. By calling
several companies, or
brokers/agents for a rate
comparison, you can
potentially save money.
You will then be able to
choose the company with the
best available price and coverage
to suit your individual needs. There
are many sources you can contact to evaluate policies and
[remiums. Your local telephone directory and the Internet
can provide names and telephone numbers for the following
organizations:
• Independent insurance brokers/agents;
• Company agents who represent one company;
• Direct writers: insurance companies that sell direct
to the public;
• Web sites.
It is important to get quotes from different companies.
You may not realize it, but the insurance rates you pay for
your car can vary dramatically depending on the insurance
company you choose. You should always compare before
deciding on a policy.
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