Future of California Low Cost Auto Insurance Unclear


Residents in the state of California may soon have to contend with paying for more expensive auto insurance as the end draws neared for a state-sponsored low cost insurance program. Faced with an ever-growing number of uninsured motorists in 2007, the state government introduced a new low cost insurance program designed to help drivers struggling to pay for insurance.

Future of California Low Cost Auto Insurance UnclearBy offering relatively cheap auto insurance, state insurance officials hoped that the number of uninsured drivers would go down. The economic crunch has made the situation worse, with California insurance commissioner Steve Poizner admitting that a quarter of the state’s drivers are uninsured. The numbers are expected to rise as unemployment rates balloon by the end of the year.

The low cost insurance allows many cash-strapped Californians to avail of cheap insurance instead of risking jail time and other motorists on the road. Qualified policyholders usually have to shell out anywhere from $161 to $368 for a full year of protection. Experts, however, say that the program only offers the bare minimums, just enough to meet with state requirements. For instance, car owners under this particular insurance program automatically get $10,000 coverage for physical injury or death per person for every accident, $20,000 for bodily injury or fatality per accident, and as much as $3,000 for property damage.

With the relatively low minimum liability amounts, some analysts point out that most policyholders often have to pay for additional costs and expenses from their own pockets. Despite these limitations, consumer advocates are calling for an extension of the program, which is expected to expire by the end of 2010.

A Los Angeles based consumer group known as Consumer Watchdog called on state officials to extend the low cost auto insurance. Doug Heller, executive director of the consumer advocacy group, says that there is an urgent need for the state to continue providing cheap insurance alternatives for financially troubled Californians. They point out that if state insurance officials allow the program to end, the state can see a substantial increase in the number of uninsured drivers. This can further drive up insurance premiums for everyone in California, they explain.

In some counties, fewer car owners have availed of the insurance program. The state’s Department of Insurance said through its representative Molly DeFrank that the decline in policyholders is not a sign that the program is a failure. DeFrank says that some motorists have opted out of the low cost program because they can afford better insurance policies.

Consumer Watchdog, for its part, says that the state government is not doing enough to promote the program. Heller also accuses insurance agents of deliberately keeping knowledge of the program from car owners.