Auto Insurance In California: What You Legally Need To Know

Auto insurance is mandatory in California, and all motorists must carry proof of coverage while driving. The state's minimum car insurance requirements include $15,000 in liability coverage for a single other driver's injury, $30,000 in coverage per accident and $5,000 in coverage for property damage. California is a pure comparative negligence state, meaning that if a driver is found to be at least 1% at fault for an accident, they could be responsible for paying some or all of the medical and car repair bills for anyone else involved.

California's minimum insurance requirements

Yes, auto insurance is mandatory in California. The state requires all drivers to carry liability coverage, which is also referred to as financial responsibility. This insurance covers bodily injuries and property damage caused by the policyholder in an at-fault accident.

Minimum Liability Insurance Requirements for Private Passenger Vehicles:

• $15,000 for injury/death to one person: The maximum amount your insurer will pay for a single person injured by you in an auto accident.
• $30,000 for injury/death to more than one person: The maximum amount that will be paid for all injuries that you cause in an accident in which more than one person is hurt.
• $5,000 for damage to property: The highest amount that an insurer will pay for damage that you cause in an accident.

Please note that these minimum requirements are set to increase effective January 1, 2025, as follows:

• $30,000 for injury/death to one person
• $60,000 for injury/death to more than one person
• $15,000 for damage to property

Other Types of Financial Responsibility:

In lieu of a motor vehicle liability insurance policy, California also accepts the following as evidence of financial responsibility:

• Cash deposit of $35,000 with DMV: Effective January 1, 2025, the minimum amount requirement will increase to $75,000.
• DMV-issued self-insurance certificate
• Surety bond for $35,000 from a company licensed to do business in California: Effective January 1, 2025, the minimum amount requirement will increase to $75,000.

California Low-Cost Automobile Insurance Program:

If you cannot afford liability insurance, you may be eligible for the California Low-Cost Automobile Insurance Program. You can find more information at mylowcostauto.com or by calling 1-866-602-8861.

The penalties for driving without insurance

In California, auto insurance is mandatory for all vehicles driven or parked on public roads. The state requires all drivers to carry liability coverage, which includes:

• $15,000 for bodily injury per person
• $30,000 for bodily injury per accident
• $5,000 for property damage per accident

Drivers must carry evidence of insurance in their vehicles at all times and present it when requested by law enforcement, renewing their vehicle registration, or if involved in a traffic collision.

First-Time Offense:

• Fine: For a first offense, drivers can expect a fine ranging from $100 to $200, plus penalty assessment fees, which can bring the total cost to around $400 or more.
• Vehicle Impoundment: The court may also order the impoundment of the vehicle, and the driver will have to pay towing and storage fees to get it back.

Repeat Offenses:

• Increased Fines: For a second or subsequent offense, the fines increase to between $200 and $500. With penalty assessments, the total cost can reach up to $1,800 or more.
• Suspension of Driving Privileges: Repeat offenders may have their driving privileges suspended for up to four years.
• SR-22 Requirement: An SR-22 certificate, proving financial responsibility and high-risk driver status, may be required for a period.
• Increased Insurance Costs: Obtaining insurance after a lapse in coverage will result in higher premiums as the driver is considered high-risk.

Additional Consequences of Driving Without Insurance in an Accident:

If a driver is involved in an accident and cannot show proof of insurance, the consequences can be more severe:

• License Suspension: The state may suspend the driver's license for one year, and subsequent offenses can result in a suspension of up to four years.
• Fines: The fine for a first offense can be up to $200, and subsequent offenses can result in a fine of up to $500, plus additional penalties and fees.
• Vehicle Impoundment: The vehicle may be impounded, and the driver will be responsible for towing and storage fees.
• Personal Liability: Without insurance, the driver may be personally liable for all damages and medical expenses resulting from the accident, which can amount to hundreds of thousands of dollars.
• Limitations on Recovering Non-Economic Damages: Uninsured drivers may face limitations on recovering non-economic damages like pain and suffering, even if they are not at fault for the accident.

The types of insurance coverage

In California, it is mandatory for all vehicle owners to have auto liability insurance. This is also known as financial responsibility insurance. The minimum liability coverage required by law in California is 15/30/5. This means that the insurance will cover:

• $15,000 for the death or bodily injury of any one person
• $30,000 total for the death or bodily injury of all other people hurt in the accident
• $5,000 for property damage (including the other vehicle and stationary objects such as fences)

This basic coverage is legally required to pay for damage or injuries you cause in an accident. However, it is recommended to purchase as much liability insurance as you can afford, especially if you have significant assets.

In addition to the minimum liability coverage, there are several other types of insurance coverage that you may want to consider, depending on your specific needs:

• Comprehensive and collision insurance: This type of insurance covers property damage to your vehicle caused by collisions with other vehicles or objects, as well as non-collision events such as theft, fire, or natural disasters. Collision and comprehensive insurance are usually offered together in California, and the cost is based on the value of the vehicle.
• Uninsured/underinsured motorist coverage: This coverage pays for injuries to you and your passengers if you are in an accident caused by a driver who does not have insurance or does not have enough insurance to cover the costs.
• Medical payments coverage: This coverage pays for medical expenses and funeral costs for you and your passengers, regardless of who is at fault in the accident. It also covers injuries sustained while riding as a passenger in someone else's car or as a pedestrian.
• Rental car reimbursement: This coverage helps pay for a rental car while your vehicle is being repaired after a covered event.
• Roadside assistance: This coverage provides assistance if your vehicle breaks down, such as towing, flat tire changes, and jump-starts.
• Loan/lease payoff coverage: Also known as gap coverage, this coverage helps pay off the remaining balance on your vehicle loan if your car is totaled or stolen and the insurance payout is not enough to cover the amount you owe.

These are some of the most common types of optional insurance coverage available in California. It is important to review your specific needs and choose the coverages that provide the best protection for you and your vehicle.

The average cost of insurance

In California, auto insurance is mandatory for all vehicles operated or parked on public roads. The state's minimum coverage liability requirements are $15,000 for bodily injury per person, $30,000 per accident, and $5,000 for property damage. The average cost of minimum coverage in California is $462 per year, or about $39 per month. However, the cheapest option is Geico, at $239 per year or $20 per month.

The average cost of full coverage in California is $1,622 per year, or $135 per month. The cheapest full coverage option is Auto Club of SoCal, with an average rate of $1,187 per year.

How to choose an insurance provider

Yes, auto insurance is mandatory in California. All vehicles operated or parked on California roads must have insurance. Motorists must also carry proof of coverage while driving.

Independent agent vs insurance company

Independent agents sell products from multiple insurance companies, including competitors. Their job is to find an insurance company that best fits your needs. The insurance company, on the other hand, determines the premium, provides you with a copy of your policy, handles payments, makes changes to your policy, and pays out claims.

Company history and reputation

Research the insurance companies you're interested in by visiting their websites. Find out how long they've been in business, their mission and values, who their leaders are, and their community involvement. Check for reviews and if you're left feeling uneasy, research another company.

Financial strength

Select a company that is likely to be financially sound for the long term. Use ratings from independent rating agencies, such as A.M. Best Company, Moody's, and Standard & Poor's, to assess the financial strength of insurance companies.

Licensed to operate in your state

Not every company is licensed to operate in each state. Buy from a company licensed in your state so you can rely on your state insurance department for support if there's a problem. Contact your state insurance department to find out which companies are licensed in your state.

Price and coverage

While price should be a consideration, it shouldn't be the only one. Less coverage may mean a lower price, but it also means more money out of your pocket when a loss occurs.

Ease of doing business

Understand how you can interact with the insurance company. For example, do they offer online claim reporting, 24/7 customer service, or social media support?

Customer service

Having good customer service is crucial. Choose a company that is devoted to explaining the ins and outs of policies and can help you when you need it. Find out if they have a designated customer care centre with phone lines and customer care representatives dedicated to taking your call quickly.

Available discounts

Many insurance companies offer discounts. Find out what discounts you may be eligible for, such as those for vehicle safety features, financial stability, or specialised construction materials.

Frequently asked questions