Protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy up to your policy limits.

The minimum liability insurance required in California is:

This is the absolute minimum coverage that you can carry. Your insurance company may recommend coverage in the range of 100/300/100.

Proof of liability insurance (Insurance Card) must be in the vehicle at all times. If you're pulled over and you do not have your card you'll be cited and fined. The fines for not carrying proof of insurance can be $500 plus possible court costs and your vehicle could be impounded.

Purchasing auto insurance is not simply about the value of your car or how often you get into accidents, it is also about how much money you are willing to pay for your coverage. All auto insurance policies have a deductible. The deductible is the part of your policy that you are responsible for paying. Auto insurance policies don't simply take care of all necessary expenses. You are required to pay for some of the damages, but the amount depends on your policy. Deductibles vary by state, but are most often in amounts of $100, $250, $500 or $1,000.

Deciding how much you are willing to pay and how often you think you will need to make an insurance claim will help you decide what deductible amount is right for you. In addition, the premium you pay, or the price of your total coverage annually, can be lowered by choosing a higher deductible.

Department of Motor Vehicles

Financial Responsibility - Mail Station J237

PO Box 942884

Sacramento, California 94284-0884

This coverage applies to injuries you or a covered driver causes to someone else due to negligence. It is very important to have enough liability insurance, because if you are involved in a serious accident, you maybe sued for a large sum of money. Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.

This coverage pays for the treatment of injuries to the driver and passengers of the policy holder's car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.

This coverage pays for damage you or a covered driver may cause to someone else property. Usually, this means damage to someone else car, butit also includes damage to lamp posts, telephone poles, fences, buildings or other structures struck by your vehicle.

This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by pot holes. Collision coverage is generally sold with a deductible of $250 to $1,000, the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver's insurance company. If they are successful, you'll also be reimbursed for the deductible.

This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer. Comprehensive insurance is usually sold with a $100 to $1000 deductible, though you may want to opt for a higher deductible as a way of lowering your premium. Comprehensive insurance will also reimburse you if yourwindshield is cracked or shattered. Some companies offer glass coverage with or without a deductible. States do not require that you purchase collision or comprehensive coverage, but if you have a car loan, your lender may insist you carry it until your loan is paid off.

This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver. Underinsured motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian.