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State-run auto plan expands in area;

LOW-COST POLICIES FOR SOME DRIVERS

San Jose Mercury News (California)

A state-run auto insurance program for low-income drivers is expanding to Santa Clara and San Mateo counties, after thousands of low-income drivers in San Francisco and Los Angeles signed up during a six-year test period.

The policies -- the subject of town hall meetings today in San Jose and East Palo Alto -- offer low-income drivers with good records a policy with bare-bones liability coverage. Santa Clara and San Mateo county residents should be able to enroll before fall, while Alameda County residents can start to sign up on April 1.

"Why risk driving uninsured when for $350 a year you could have insurance and drive legally?'' asked Commissioner John Garamendi, who will host the sessions.

There are an estimated 3 million people driving without insurance in California, according to Garamendi's office. That increases insurance costs for insured drivers. It also leaves many without financial protection, should they get into an accident.

Program expanding

The state of California launched the low-cost auto insurance program in July 2000 as a pilot program serving Los Angeles and San Francisco counties. That program is slowly expanding to other parts of the state this year. The program is required by law to pay for itself -- the premiums cover the costs it pays out.

Qualifying households must have annual incomes under $23,925 for a single driver, or $48,375 for a family of four, which is 250 percent of the poverty line. A driver must not have had more than one point on his license or one at-fault accident in the last three years.

The state's policies provide basic coverage that is beneath the level insurance companies typically are allowed to offer. A low-income driver covered by the state's program gets $10,000 in bodily injury liability per person injured, up to $20,000 per accident; and $3,000 in property damage.

Outside of the low-cost program, the minimum coverage insurance companies can offer is $15,000, $30,000 and $5,000 for those categories, respectively.

Garamendi concedes that the policy won't be enough for "a serious accident." But, he said, "it's certainly enough to cover the minor accidents. And that's better than nothing -- from both the uninsured driver's point of view as well as the not-at-fault driver.''

Drivers who get into multiple accidents are removed from the program after the claim is paid.

Insurance industry officials caution that the policies might inspire a false sense of security for policy holders.

"You're not getting the minimum protection that people should have,'' said Samuel Sorich, president of the Association of California Insurance Companies. Noting that only 23,000 people have signed up in the two counties, Sorich said consumers are making their own decision about the value of the policy.

"Many people are uninsured simply because they can't afford the product. But I also think there's a portion of the population that will never buy insurance. They just avoid it. With the low-cost program, I think despite the best of intentions, I think there's many low-income families who just do not see the value of this policy because it is a liability policy.''

Nearly 86 percent of those who've used the policy since its inception did not have any insurance before signing up, according to the California Automobile Assigned Risk Plan, which administers the policy. Nearly 44 percent of those who've signed up are in the 40- to 59-year-old age bracket, and 73 percent have an annual household income of less than $20,000.

Safer for everyone

Doug Heller, executive director for the Foundation for Taxpayer and Consumer Rights, said the low-cost program is making the roads safer for all drivers. But it shouldn't be seen as a panacea for all people.

"This is not something you shop for if you already have insurance and you're getting by,'' Heller said. "This is for people who can't afford to buy insurance, or who have been stuck with the decision to either driver illegally or not drive at all.''

IF YOU'RE INTERESTED:

Commissioner Garamendi will be holding town hall meetings on the policy today:

EAST PALO ALTO, 10 a.m, Ravenswood City School District Board Room, 2120 Euclid Ave., 94303

SAN JOSE, 3 p.m., The Center for Employment Training, The Antonio Soto
Theatre, 701 Vine St. On the Web: www.aipso.com/lc/program.asp
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Contact Matthai Chakko Kuruvila at mkuruvila @mercurynews.com or (408)
920-2722.