Consumer Federation of California

Program provides affordable auto policies, but people with significant assets will need more protection.

In a land where the car is virtually everywhere, one out of four
drivers in California gets behind the wheel without automobile
insurance.

Now a program that recently expanded to every county is meant to reduce
the state’s estimated 5.6 million uninsured drivers by providing them
with a liability insurance policy for less than $400 a year. In
October, Insurance Commissioner Steve Poizner added the last 16 of the
state’s 58 counties to the California Low Cost Automobile Insurance
program. One out of four injury accidents in California involve an
uninsured driver, according to the Department of Insurance.

Uninsured drivers not only break the law but also force insured drivers
to supplement policies with uninsured motorist coverage.

"Traveling the roads without insurance is not only illegal, it puts
everyone else on the road at risk. For many low-income working
families, the price of auto insurance may be out of reach," Molly
DeFrank, a department spokeswoman, wrote in an e-mail. "This program
was designed with these Californians in mind, and is an affordable
option to help them comply with the law and protect everyone on the
road."

Bay Area counties are already participating in the program.

Before applying for a low-cost policy, Kristin Woods had considered
getting insurance outside the low-cost program but found it too
expensive.

"It would have been twice as much," said Woods, a 25-year-old Oakland
resident. "I went to an online (car insurance Web site) and it gave me
a quote of over $600. I could not afford that."

As a resident of Alameda County, Woods is eligible for a liability policy that has a yearly premium of $318.

Although the program does help uninsured drivers comply with state law,
the liability limits are lower than what is available under "regular"
basic liability insurance policies. Liability insurance covers only
injuries to others and damage to their property. It doesn’t cover
damage to your car or injuries you might suffer in an accident.

The low-cost program has liability limits of $10,000 bodily injury or
death per person, $20,000 bodily injury per accident and $3,000
property damage per accident.

The limits for regular liability insurance are higher: $15,000 bodily
injury or death per person, $30,000 bodily injury per accident and
$5,000 property damage per accident.

The low-cost program also offers consumers the option of paying extra
for uninsured motorist bodily injury coverage or medical payments
coverage

Consumers interested in getting a low-cost policy can call
866-602-8861. Callers will be asked some screening questions to
determine their eligibility. Those who qualify will be provided with a
list of insurance agents in their area who sell low-cost auto insurance
policies.

Low-cost auto insurance was initially launched as a pilot program in
San Francisco and Los Angeles counties in 1999, two years after a state
law required motorists to have auto insurance.

Thanks to legislation that expanded the program to other parts of the
state, residents of Alameda, Contra Costa, San Mateo and San Joaquin
counties could sign up for the program in 2006. Solano County was added
in October.

Premiums for low-cost policies differ by county, but qualifying income
limits and criteria are the same statewide. A single person’s yearly
income cannot exceed $25,525; the yearly household income for a family
of four cannot exceed $51,625. Motorists must have a good driving
record, be continuously licensed for at least three years and have a
vehicle valued at no more than $20,000.

Maria Wong, a State Farm insurance agent in Oakland, has sold about 10
low-cost policies since the program became available in Alameda County
last year.

"For some people, it’s an option, rather than ‘I just can’t afford insurance.’"

Still, the liability limits available under the low-cost insurance
program have discouraged some consumers from buying the product, she
said.

"It’s very limited. A couple of them went for the regular (liability insurance)," said Wong.

Critics point to the program’s low liability limits as a factor that
helps explain why only 36,121 policies have been sold statewide.

Despite the lower limits, the program provides a way for low-income motorists to have insurance and drive legally.

"The majority of people who sign up for this program don’t have
insurance. It’s really designed for people who are driving around
without insurance because they can’t afford it," said Sandra Chapin,
program director for the San Mateo-based Consumer Federation of
California.

The 1997 state law that requires motorists to have insurance requires
them to provide proof of insurance when registering a vehicle or be in
the process of obtaining insurance. The law also requires motorists to
show proof of insurance when stopped by a law enforcement officer.

Separate legislation that went into effect in October 2006 is designed
to deter motorists from canceling an insurance policy after registering
a vehicle.

Senate Bill 1500 requires insurance companies to notify the state
Department of Motor Vehicles electronically when an insurance policy is
canceled after a vehicle is registered.

The DMV then sends out a notice of registration suspension to
motorists, saying they have to obtain insurance within 45 days to
reinstate their vehicle registration. A notice can also be sent when
proof of insurance is not obtained within 30 days of a vehicle’s
initial registration.

Since SB1500 went into effect, the DMV has sent out more than 1.8
million notices to motorists. About 500,000 of those motorists got
their vehicle registration reinstated by providing proof of insurance
and paying a reinstatement fee.

Eve Mitchell covers personal finance. Reach her at 925-952-2690 or emitchell@bayareanewsgroup.com.

Interested in low-cost auto insurance?

Call 866-602-8861 to see if you qualify. If you do, you will be
provided with a list of insurance agents in your area who sell low-cost
policies. Information about the program is also available at the
California Low Cost Automobile Insurance program Web site, https://www.aipso.com/lc.