How Auto Insurance Policy Pricing Works
Auto insurance policies typically are divided into six categories of coverage, which are priced separately and then added together to determine your premium. State law requires that you purchase at least two parts: bodily injury liability and property damage liability. Additional coverage and its cost will depend on your individual situation.
* Bodily injury liability covers the injury you or another driver of your car inflict on someone else in an accident. The minimum liability coverage required by the state is $15,000 per person and $30,000 per accident. Drivers more typically carry $100,000 per person and $300,000 per accident. Some companies offer liability maximums of $500,000 or more.
Many financial planners, however, recommend getting liability coverage equal to at least twice your net worth. (To determine your net worth, add up your assets--property, cash and investments--and subtract your liabilities, including mortgages, loans and credit card debt.) For those with a net worth of more than $250,000, planners recommend an umbrella liability policy--a separate policy that offers coverage of $1 million or more.
* Property damage liability covers damage you cause to someone else’s property. The state-mandated minimum is $5,000, although the typical driver carries $50,000.
* Medical payment covers treatment of your injuries after a crash. Many people who have good medical insurance coverage through work or other health insurance choose to skip this option.
* Collision covers damage to your car in an accident. The driver usually pays a deductible of $100 to $1,000 before collision coverage kicks in.
To save money, the Insurance Information Institute recommends dropping collision coverage on any vehicle worth less than $1,000. Some financial experts say consumers should consider dropping coverage on any car older than 5 years.
You can also save money by increasing your deductible. The institute estimates that raising your deductible from $200 to $500 can trim your collision coverage costs by up to 30%.
* Comprehensive covers damage to your car not resulting from a collision. It covers theft and damage because of fire, riot and falling objects, among other hazards. As with collision coverage, the driver pays a $100 to $1,000 deductible. Raising the deductible lowers the cost for this coverage.
* Uninsured motorist coverage covers treatment for injuries to you and your passengers in an accident caused by someone who doesn’t have auto insurance. Many insurance experts recommend matching your uninsured motorist coverage to your bodily injury liability coverage, such as $100,000 per person and $300,000 per accident.
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California’s Top 10
Increased competition has reduced rates and eroded market share for some of California’s largest insurers, but the leading 10 companies still write about 75% of the state’s auto policies. Eight of California’s 10 largest auto insurers received superior (A+ or better) financial ratings from A.M. Best Co., a leading rater of insurers’ financial strength. The two other were rated excellent. A.M. Best ratings range from A++ to F.
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California National Financial Company market share* business rating State Farm 16% $14.7 billion A++ Farmers 14.5 4.3 billion A+ California State 10 909 million A+ Auto. Assn. Allstate Insurance 8 8.6 billion A- Automobile Club of 7 645 million A+ S. Calif. Mercury Insurance 7 150 million A+ 20th Century Insurance 6 551 million A- United Services 3 818 million A++ Auto. Assn.** Progressive 2 2.8 billion A+ Safeco 1.7 1 billion A+
(800) Company phone no. State Farm See agent Farmers See agent California State 922-8228 Auto. Assn. Allstate Insurance 829-0946 Automobile Club of 924-6141 S. Calif. Mercury Insurance See agent 20th Century Insurance 211-7283 United Services 531-8111 Auto. Assn.** Progressive 288-6776 Safeco See agent
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*Based on private passenger auto liability written premiums
**Insures only military personnel, veterans and their dependents
Sources: California Department of Insurance, A.M. Best
