Buying Auto Insurance in California


California state flagWith California car insurance laws requiring financial responsibility of all motorists, and with a greater than 1-in-25 chance that drivers in the state will cause an accident over the course of a year, motorists in the state likely will want to buy a policy to help protect them from serious financial consequences.

But after determining their desired coverage profiles and getting rates from a variety of companies, consumers still need to do a little more research before finally purchasing a plan.

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Researching a California Insurance Company’s Reputation before a Purchase

Many consumers consider that their coverage shopping process ends when they find the cheapest California auto insurance rate. But regulators across the country advise shoppers to research the companies they are considering before deciding to finally buy a policy online or in person.

California regulators make available a useful tool to help shoppers complete this task: consumer-complaint reports. These reports exist to give prospective policyholders an idea of how dissatisfied current and former customers have been with a particular insurer. They list the total number of justified complaints, the amount of policies in place and a ratio of complaints per 100,000 policies. The ratio is the best thing to pay attention to, since it accounts for differences in insurer size.

The latest report is accessible through the California Department of Insurance website. It contains complaint data for 2008, 2009 and 2010 for 50 of the state’s largest companies.

Before Buying, Check Up on an Insurer’s Financial Stability

When a policyholder buys auto insurance from a California insurer, the coverage provider is basically saying that it agrees to pay up to a certain dollar amount for damages in the event of an accident. But if the insurer agrees to pay for more damages than it can actually afford, this can obviously cause problems. That’s why regulators and rating agencies keep an eye on insurance companies’ financial stability by checking up on the amount of money they have on hand to pay claims. Agencies like A.M. Best make their evaluations available online for consumers to search.

Only a handful of insurers each year are determined to be financially insolvent, meaning that they have promised more than they can make good on. But trying to collect on a claim from a company going through liquidation can prove to be a prolonged process, and researching financial stability can be done quickly.

Deciding How to Pay for Your California Car Insurance Purchase
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Californians have the options to buy a policy for a period of one month, three months, six months or one year, depending on the insurer. And if a consumer chooses one of the longer periods, he or she can break up the price into installments.

Motorists considering this route should know that there may be extra billing charges if they don’t pay for the entire policy up front. And state regulators advise consumers that “If you use a premium finance company to pay for your insurance, the monthly payments may be easier, but the total of payments will be larger.”