California is suffering many serious effects from the current economic downturn. An alarming trend nationwide and in California is that more people are canceling or reducing their auto insurance coverage in an effort to control expenses.

As tempting as it is, every effort should be made not to cut motor vehicle insurance from family budgets. The consequences, particularly in California, can be devastating.

California Insurance Requirements

California law mandates that each vehicle carry a minimum level of bodily injury and property damage liability insurance. If an insured driver is at fault in a car accident, his or her liability insurance will cover the injuries of the people in the other car and damage to that vehicle. Failure to insure your car may result in a citation, fines, impoundment of your vehicle, suspension of your car registration and personal liability for damages and injuries you cause in an accident.

Optional but Smart Coverage

Even if your finances are tight, two types of relatively inexpensive, optional insurance coverage are worth serious consideration above and beyond California's mandated liability insurance:

Med Pay - Also known as personal injury protection (PIP), med pay benefits will pay your medical expenses even if you caused the accident. It may compensate you for medical expenses not covered by your health insurance. Med Pay costs so little for the protection it offers. If you are in an accident Med Pay pays the doctor of your choice; even chiropractic care is included.

Uninsured or underinsured motorist coverage - At 18 percent, California ranks the seventh worst in the nation in percentage of uninsured motorists as of 2007, according to the Insurance Research Council (IRC). That means that roughly one out of five cars you see on the road in California is not insured. If you have an uninsured motorist policy (UIM), it would protect you in case of an accident with one of them. Similarly, an underinsured motorist policy would protect you if the other driver was insured, but inadequately. You also may need this protection if you are hit by an uninsured or underinsured driver while walking or biking, or in case of a hit-and-run accident where the driver is unknown. Uninsured or underinsured motorist coverage could cover medical bills, lost wages from missed work and other related expenses. Try to purchase a relatively high level of coverage if possible, because in California, if the other driver has similar coverage, only the higher of the two policies will apply; the two amounts of coverage cannot be stacked, or added together, to reach a combined liability amount.
Can't Afford Insurance?

In California, insurance companies are required by law to offer low-rate auto insurance to drivers older than 19 with good driving records, earnings up to 250 percent of the poverty level and cars worth less than $20,000. The minimum coverage levels are lower, but it is at least a safety net. If you are struggling financially, investigate whether you may qualify for the California Low Cost Automobile Insurance Program.

Even if you do not qualify for the low-cost option, you should make every effort to protect yourself, your family and passengers in your car by maintaining at the very least the minimum required coverage, plus med pay and uninsured coverage at the highest level you can reasonably afford. Remember, cutting coverage now will probably not save you money in the long run if you are in an accident.

What Happens if You are in an Accident and Have No Insurance?

Even if the accident is not your fault, you can't recover anything for your pain, inconvenience and difficulty. It greatly devalues your injury case. Most attorneys won't be able to help you get the compensation that you would ordinarily be able to get if you had insurance.