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Ca car insurance tax deductible

Learn how to buy the best California car insurance policy for your particular situation, what the average car insurance rates are for your neighborhood and how California state insurance and traffic laws work.

The average car insurance rate in California is $1,433. Unlike nearly all other states, in California your credit history isn't allowed to be factored into your car insurance rate, and where you live is considered, but not given as much weight as in other states. California insurance companies primarily factor in your age, your driving record and how many miles you drive when deciding how much you pay. But every company uses its own method for assessing risk. That’s why the cost for the same policy can vary significantly among insurance companies – and why you should compare rates. For example, in Los Angeles ZIP code 90029, the highest rate among six carriers is ($3,194) is more than twice as much as the lowest ($1,464).

Cheap car insurance in California

California car insurance requirements

State law requires the following coverages:
Minimum bodily injury liability $15,000/$30,000
Minimum property damage liability $5,000

California car insurance laws mandate that you carry minimum liability coverage limits of 15/30/5 on your vehicle. While buying just minimum coverage means you are getting the cheapest car insurance in California, you are only covered for damage you do to other drivers’ cars and for others’ injuries. That means your insurer won’t pay for damage to your car or for your injuries if you cause an accident.

Keep in mind that a minor accident could easily exceed minimum liability coverage limits, leaving you responsible to pay for damages not covered by insurance. For example, if you have $30,000 in bodily injury liability insurance and you cause an accident that costs $50,000, you have to pay $20,000 out-of-pocket. If you don’t have the money on hand, your assets may be taken to cover the costs. California also has one of the lowest property damage liability limits in the country at just $5,000. If you hit a car and it costs more than $5,000 to fix it, you’re on the hook for the rest of the bill.

If you want more protection, it will cost more, but as you’ll see in the chart below, additional coverage is typically affordable. Boosting coverage from the state minimum to higher liability limits costs $188 a year or $16 a month. Hiking your policy to full coverage with a $1,000 deductible costs, on average, $1,545 more, or $129 a month.

Coverage limits Average annual rate
Liability Only – state minimum $723
Liability Only - 50/100/50 BI/PD $911
Full Coverage - 100/300/100 BI/PD
$1,000 Comp/Collision deductible
$2,268
Full Coverage - 100/300/100 BI/PD
$500 Comp/Collision deductible
$2,574
Full Coverage - 100/300/100 BI/PD
$250 Comp/Collision deductible
$2,771

*The table shows the average annual rate of 10 ZIP codes in the state from the following carriers, in no particular order: Progressive, Allstate, State Farm, Nationwide, GEICO and Farmers. Data was provided for CarInsurance.com by Quadrant Information Services.

Recommended car insurance coverage

When deciding how much car insurance to buy, you need to assess your particular situation. To drive legally, you must buy at least the minimum liability insurance required by your state. If you didn’t borrow money from a lender to buy your car and you don’t have a lot of money or assets to protect, that might be a wise choice. If, however, you don’t own your car outright, you will be required to get comprehensive and collision coverage. Additionally, if you have a home and savings to protect, it’s wise to buy more coverage.

Use our How Much Car Insurance Do You Need? tool to get a recommendation.

AGE STATE VEHICLE MODEL YEAR PRIMARY RESIDENCE OWN RENT VEHICLE FINANCING OWNED FINANCED LEASED

Liability

The more money and assets you have, the more likely it is that you may be sued following a car accident. Unless you are determined to pay the lowest car insurance rate possible, we recommend you buy higher than minimum liability coverage. If your net worth is:

  • less than $50,000, choose at least 50/100/50
  • between $50,000 and $100,000, choose at least 100/300/100
  • more than $100,000, choose at least 250/500/100

If you're leasing or financing your car, you automatically need coverage of 100/300/100 or higher.

Collision and comprehensive

Collision coverage pays for damage to your car after an accident that you cause. Comprehensive insurance pays to replace stolen cars and for damages from vandalism, flooding, hail, fire and animal strikes. If your car is:

  • less than 10 years old, you should strongly consider buying collision and comprehensive.
  • more than 10 years old, only buy collision and comprehensive if your car is worth $3,000 or more, if you couldn’t afford to replace your car if it’s wrecked, or if you just want more protection on your policy.

If you buy comp and collision, check our guide to choosing a deductible amount.

Uninsured/underinsured motorist

Uninsured motorist coverage and underinsured motorist coverage pays for damages if you’re hit by a driver with no insurance or a driver with coverage that’s insufficient to pay for your repairs and medical expenses. These should match the liability limits you choose. In most states, including California, these coverages are optional.

Medical coverage (MedPay)

Medical payments coverage can help pay for the medical or funeral expenses of covered drivers and passengers after an accident, regardless of fault, up to $25,000. In most states, including California, it's an optional addition to your car insurance policy. MedPay does the following:

  • Covers you and your passengers’ medical expenses
  • Pays for expenses after health insurance limits are exceeded
  • Offers additional protection to insured drivers who are hit by a car while walking or biking

If you and your passengers:

  • Don’t have health insurance, or have a plan that doesn’t cover car accidents or has low limits, we recommend that you add medical coverage of at least $5,000 to your car insurance policy.
  • Do have health insurance, it’s still a good idea to have medical coverage if you want the best protection in your policy, as it can pay out after your health benefits are maxed out.

Gap insurance

If you got a loan to pay for your car and have an accident, gap insurance pays the difference between the cash value of your car and the current outstanding balance on your loan or lease.

  • If you’re financing your car, your car is less than one year old and you’ve put less than 20 percent down on it, you should buy gap insurance. If not, you don’t need gap insurance.
  • If you’re leasing your car, it’s a good idea to buy gap insurance if you don't already have the coverage in your lease agreement.
  • If you own your car outright, you don’t need gap insurance.

Car insurance companies in California

Scores are based on Insure.com’s “Best Insurance Companies” customer review survey of 3,700 customers. Companies not in the top 10 of market share do not qualify. All scores are out of 100.

Best car insurance companies in California

Best customer service:

  1. USAA – 100
  2. Mercury -- 94
  3. Auto Club of Southern California – 93.9
  4. State Farm – 92
  5. Allstate – 91.8

Best claims service:

  1. USAA – 100
  2. Auto Club of Southern California – 96.3
  3. Liberty Mutual – 96
  4. Geico –93.9
  5. CSAA Insurance Group – 92.5 Progressive – 92.5

Best value for the price:

  1. Auto Club of Southern California – 95
  2. Mercury – 92.5
  3. CSAA Insurance Group – 91.7
  4. USAA – 91.3
  5. Progressive – 86.3

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Largest car insurance companies in California

Rank Company Name Direct premiums written Market share % Overall Customer Review Ranking
1 State Farm Insurance Group 3,358,928 14.48% 90.4
2 Farmers Insurance Group 2,894,321 12.48% 81.1
3 Allstate Insurance Group 2,032,965 8.77% 87
4 Mercury General Group 1,923,392 8.29% 91.1
5 Auto Club Enterprises Insurance Group 1,885,077 8.13% 94.8
6 Geico 1,814,503 7.82% 88.1
7 CSAA Insurance Group 1,530,185 6.6% 91.3
8 USAA Group 1,044,934 4.51% 97.2
9 Progressive Insurance Group 968,690 4.18% 89.6
10 Liberty Mutual Insurance Companies 791,251 3.41% 86.4

Source: A.M. Best market share rankings are based on direct premiums written in 2015.

Customer review rankings based on Insure.com's 2016 "Best Insurance Companies" survey of 3,700 customers. Scores are out of 100.

Car insurance in California cities

Find out what the most expensive and the cheapest car insurance rates are by ZIP code, as well as how they compare statewide.

Los Angeles car insurance

San Francisco car insurance

San Diego car insurance

California car insurance laws

Good Driver Discount

Under Prop 103, drivers who meet these conditions must receive rates at least 20 percent lower than a driver who does not meet these criteria at the same car insurance company:

  • Has been licensed for at least three consecutive years
  • Has no more than one point on his or her driving record

CAARP: California Automobile Assigned Risk Plan for high-risk drivers

In California, if you cannot find a car insurance company that will insure you, you can get liability coverage through the California Automobile Assigned Risk Plan (CAARP). This plan is designed for high-risk drivers who are unsuccessful in obtaining insurance from companies that sell non-standard policies.

The plan works by taking your application and assigning it to an insurance company. All insurance companies licensed in the state must accept CAARP applicants. The number of CAARP assignments is based on insurance company market share. The more policies an insurance company issues, the larger the portion of CAARP assignments it is required to take.

The rates used by the plan are the same no matter what insurance company issues the policy. The plan also offers installment options. After three years with a clean driving record, you can get out of the CAARP program and buy a standard policy.

To buy a CAARP policy, you have to work with an agent who is certified by the state to assist in getting drivers these special policies. Start by calling the number below to be paired up with a “certified producer” in your area who will help find an insurer for you. Afterwards, you and your assigned certified producer will work with the insurance company’s agent to get you an appropriate policy.

To Find a CAARP Certified Producer, call 1-800-622–0954

Insurance for low-income drivers

If you are low-income, you may be eligible for the California Low Cost Auto Insurance program, which permits lower liability limits of:

  • Bodily injury liability - $10,000 person / $20,000 per accident
  • Property damage liability - $3,000 per accident

The low-cost program (rates range from about $241 to $556 a year; discounts are available for those who have had a clean driving record for three years) is available to drivers who meet the following criteria:

  • Have a valid California driver’s license
  • Own a vehicle valued at $25,000 or less
  • Be at least 19 years old and meet income eligibility guidelines

Income eligibility requirements per household effective February 2016 are:

  • 1 person - $29,700.00
  • 2 people - $40,050.00
  • 3 people - $50,400.00
  • 4 people - $60,750.00
  • 5 people - $71,100.00

Pure comparative negligence

California is among the 13 states that have a pure comparative fault rule. States with pure comparative negligence laws let all drivers recover some payment for their damages, even if they are mostly to blame. For example, a driver 70 percent at fault in an accident could make a claim for damages against the other driver's liability coverage but expect to receive only 30 percent of the claim amount.

Claims

You should file a claim promptly after an accident. Your policy should state what is required of you, which may say a reasonable time period or give a specific time-frame in which to make the claim. For instance, you typically must file a stolen car claim within 30 days of the theft.

California requires an acknowledgment of all claims within 15 days. Under California law, insurance companies are required to accept or deny the claim within 40 days after receiving proof of the claim. If the claim is accepted, payment must be made within 30 days from the date settlement was reached.

You have up to three years to file a property damage lawsuit.

Medical claims

California law requires that you file medical claims within two years of the incident. You have up to two years after the incident to file a personal injury lawsuit.

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Cheap car insurance for under 25 years oldNo one wants to be ill, but at least Uncle Sam gives Americans a little relief in the form of federal income-tax deductions for medical expenses.

Let Insurance.com help you find affordable health insurance now.

"Medical bills can be a huge expense, so the Internal Revenue Service gives people a break so they can recoup some of that money," says Lisa Greene-Lewis, a certified public accountant with TurboTax.

In recent years, more than 10.2 million U.S. households collectively deducted $85.3 billion in medical expenses on their federal tax returns, according to Internal Revenue Service statistics. Many Americans can make similar write-offs from their state income taxes as well.

But who can deduct what can be complicated, and experts say few taxpayers fully understand the rules.

"I think the biggest misconception is that people think that all medical expenses are deductible from dollar one. But for my clients, I'd say that well under 10 percent actually qualify to deduct anything," says Rob Seltzer, a Los Angeles certified public accountant and chairman of the California Society of CPAs' Financial Literary Committee.

Here's a look at the basics of deducting medical expenses from your federal income taxes. Consult your tax adviser for specifics regarding your personal situation.

Who qualifies for medical-expense tax deductions?

The Internal Revenue Code includes two important rules that can limit who truly qualifies for relief from medical expenses:

  • You must generally itemize deductions on Form 1040 Schedule A rather than take the "standard deduction" if you want a break on medical expenses. If what you plan to deduct for everything (from medical bills to mortgage interest) adds up to less than the standard deduction ($6,300 for singles, $9,300 for heads of household and $12,600 for married joint filers for tax year 2016), there's no point in itemizing.
  • Most taxpayers can only deduct allowable medical expenses that exceed 10 percent of "adjusted gross income" (AGI). That's the amount you earn in a given year from wages, investments and other sources minus what you paid for alimony, student-loan interest and a few other things. So, if a married couple has $100,000 AGI and $10,500 of qualified medical expenses, they can deduct only $500--$10,500 minus $10,000 (10 percent of their $100,000 AGI). Seniors age 65 or older can deduct any medical expenses above 7.5 percent of AGI.

Seltzer says the only taxpayers who pass both tests are typically those with unusually high medical expenses relative to income. That's often just the elderly, the unemployed, low-income people or those with big medical bills due to serious illness, in-vitro fertilization or a child's birth.

Are health insurance premiums tax deductible?

Yes, in certain circumstances, you can deduct your health insurance premiums as part of your overall medical expenses.

But you can deduct only premiums that you pay with after-tax money from your own pocket. For example:

  • If your health insurance premiums are paid entirely by your employer or the government, you cannot deduct the cost.
  • If you have health insurance through your employer and your share of the premium is deducted from your paycheck pre-tax, you cannot deduct the cost because the premiums were tax-free already. If you don’t know whether you pay pre-tax or after-tax, ask your human resources department.
  • If you buy health insurance through the state- or federally run health insurance marketplaces, you can deduct only the portion of the premium you pay out of your own pocket. You cannot deduct the amount of any subsidy.
  • If you buy an individual or family health insurance plan, either on the open market or through a marketplace, and you pay all of the cost out of pocket, then the whole amount is deductible.

Your total medical expenses, including premiums, must surpass 10 percent of your adjusted gross income to be deductible.

For 2016, the self-employed have several deductions and tax credits they can use. For detailed information, visit the self-employed health insurance deduction 2016 section of the federal Affordable Care Act website.

What other medical costs are tax deductible?

Compare quote car insuranceAssuming you pass the above tests, the IRS lets you write off pretty much every out-of-pocket medical expense that's ordered by a doctor or other health care professional. (See IRS Publication 502 for a list.)

Common items you can deduct from taxes include medical appointments, tests, prescription drugs and durable items like wheelchairs and prescription glasses. In fact, you can even write off unusual expenses as long as they're medically necessary. For instance, one of Seltzer's clients deducted a home lap pool because a serious injury meant the man could only swim for exercise, but couldn't risk colliding with others in a public pool.

You can also deduct transportation expenses for going to the doctor -- parking, tolls, mileage, cab or bus fares -- and even air fare and certain lodging costs for out-of-town treatments.

But remember, you can only write off out-of-pocket expenses -- copays, deductibles, etc. -- not bills that your insurance covers.

What heath expenses are not tax deductible?

There's a wide list of things you can't deduct, from medical marijuana to over-the-counter vitamins and drugs (except insulin). Hair transplants and cosmetic surgery are also out, unless procedures correct underlying medical problems (like breast-reconstruction surgery following mastectomies).

As noted above, you also can't deduct expenses that your insurance covers, nor things you paid for with money from a flexible spending account or health savings account. If you get insurance through work, you typically can't write off your share of the premiums because your employer won't normally withhold taxes on the money in the first place.

Writing off health insurance for the self-employed

One big exception to the above rules involves health insurance premiums paid by self-employed people. You can write those off as adjustments to income even if you don't itemize your deductions. The adjustment to income cannot exceed what you earned, though.

Self-employed people can deduct health insurance premiums directly on Form 1040 (Line 29 on returns for the 2014 tax year). You deduct all other qualified medical expenses on Schedule A, Line 1.

How to maximize your health care deductions

You obviously can't control when you get sick, but TurboTax's Greene-Lewis says Americans who are close to meeting the annual AGI threshold should "bunch up" procedures to maximize any deductibility.

For instance, if one family member has a major illness in a given year and rings up big hospital bills, everyone else in the family should get any needed dental work, prescription eyeglasses, etc., during the same year in order to boost the available tax break.

"You should look at anything you were putting off and bump it up [to the current tax year] if that's going to put you over the AGI threshold," she says.

You don't need to attach receipts to your 1040, but it's a good idea to keep them for three years after filing your return just in case the IRS audits you.

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Bodily injury:

Most states require bodily-injury liability insurance to cover medical treatment, rehabilitation and funeral costs incurred by your own passengers, other drivers, their passengers and even injured pedestrians. Other costs covered include lawyers' fees and non-monetary losses related to pain and suffering.

State minimum-coverage limits are too low to protect the assets of most motorists. Unless your income and assets are minimal, buy at least $100,000 per person, $300,000 per accident.

Property damage:

Property-damage liability covers repair or replacement of other people's cars and property. State minimum limits average about $15,000. With the average cost of a new car at $30,000, however, buy at least $35,000 in coverage.

Uninsured-motorist:

When a hit-and-run driver, or someone who's inadequately insured, strikes your car, uninsured-motorist and underinsured-motorist coverage pays for the medical, rehabilitation, funeral, and pain-and-suffering costs of the victims in your car. This crucial coverage also insures your household members as pedestrians. Buy this coverage at the same limits as your bodily-injury liability coverage.

Personal-injury protection (PIP)

Often known as "no-fault," this covers medical, rehabilitation and funeral costs for household members, as well as some lost wages and in-home care. Unless your health and disability coverages are slight, buy the minimum required.

If your budget permits, consider the following options:

Collision:

Pays to repair or replace your car after an accident. If you have bought a new car with a loan, you'll be required to buy this coverage.

Comprehensive:

Pays if your car or its contents are stolen, or if your car is damaged by fire, water or other perils. Lenders will also require this coverage.

For both, you'll have to choose a deductible: a dollar amount you fork over to the repair shop before the insurer antes up. The higher the deductible you carry, the more you'll save. Try to carry a deductible of at least $500 on each coverage.

For cars worth less than $5,000, comprehensive and collision probably aren't worthwhile. Over time, the premiums you'll fork over will probably exceed the payout, even if your car is totaled. Plus, in an accident that isn't your fault, you can figure that the other driver's insurance will cover your car. (To estimate your car's market value, consult the Kelley Blue Book.)

You can probably do without these:

Medical payments

This coverage pays the deductibles and co-payments not covered by your health insurer, or the insurer of any of your passengers. It also covers some funeral and rehabilitation costs. It's not useful unless you face very high health-insurance deductibles. If your state requires it, buy the minimum.

Towing and labor

This only pays if you can't drive your car away from an accident. Members of auto clubs with such privileges don't need this coverage.

Rental insurance

It costs only a few dollars per year, certainly a worthwhile expense if you travel and rent cars frequently. But spare the expense if you don't rent cars often and can depend on another car in a pinch.

Glass breakage

Glass breakage coverage can add up to 20 percent to your comprehensive premium. When it's not built into the premium, avoid it.

Here are some other money-saving tactics:

Combine coverage.

As with any product, it's cheaper for insurance companies to sell more to one customer, so insurers often cut premiums up to 15 percent if you link auto and homeowners' policies.

Sweat the small stuff.

Frequent claims are red flags for insurers; some won't renew policyholders with more than two claims in three years. So try to carry more of the risk yourself by paying for repairs costing under $1,000 out of your own pocket. Or, if the damage is purely cosmetic, you could just ignore it.

Raise your deductible.

The average driver files a collision claim once every three years, and a comprehensive claim once every 10 years. Increasing a collision deductible on your auto policy from $200 to $500 can save up to 30 percent annually. Given the likelihood of filing a claim, you might come out ahead with the higher deductible.

Drive safely.

A clean driving record -- for at least 36 months -- keeps your premiums low. Completing a defensive driving course can also qualify you for a discount.

Pick the car carefully.

Cars that cost a lot to repair, or that are popular with thieves, can cost more to insure. The National Insurance Crime Bureau has a list of the most frequently stolen cars.

Park your teens in one car.

Name teenagers as the occasional drivers of your least-expensive car, and make sure they only drive that car.

Get your credit straight.

Insurers have access to all sorts of personal information, including your motor vehicle record, credit record, and your history of claims with other insurers. It makes no sense to lie about your background. Mistakes can happen, however, and a glitch on your report could make you look like a worse risk than you are. If you haven't done so in a few years, consider obtaining your credit report from all three credit reporting services.

Keep records:

When filing a claim, your best protection is good records. After a car accident, take down the names and license numbers of all drivers involved, and identify any witnesses. Record your version of the event; take photos, if possible. Get the police report.

CNNMoney (New York) First published May 28, 2015: 5:41 PM ET

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