California, with its amazing cities, beautiful beaches, and delicious wine country, is a great place to live. However, with all of these attractions comes a high cost of living.
||Average rates in California compared to U.S. average
Given that healthcare in California costs 10 percent more than the national average and transportation costs 37 percent more, is a total liability limit of $50,000 sufficient? Our answer is no — the minimum insurance coverage in California is not enough.
We recommend you buy more than the minimum coverage the state requires. Why? First of all, liability coverage only applies to the other party’s bodily injuries and property damages in accidents you caused. You’ll be responsible for your own bodily injuries and property damages, and if you lack personal injury protection (PIP), collision coverage, and comprehensive coverage, you’ll have to pay out of pocket.
In contrast to liability insurance, full coverage insurance will cover both your and the other party’s damages and losses in accidents you caused. We recommend liability limits of up to $500,000, or however much you can afford. If you have a high net worth, buy more coverage to protect yourself from lawsuits. For collision and comprehensive coverage, the limit is your car’s actual market value (AMV) — what you could get if you sold it tomorrow.
Finally, we recommend adding uninsured/underinsured motorist coverage (UM/UIM) for people who are driving without insurance or driving with insufficient insurance to match your losses. An estimated 17 percent of California drivers lack insurance, which is above the 12 percent national average.2 If someone who lacks insurance hits you, UM would cover your bodily injuries and property damages. The limits should match your liability limits.
Talk to your agent or broker about how much insurance you need, as it’s highly individualized based on your needs, circumstances, and budget.