California's Driven Insurance: How Does It Work?

Driving without insurance in California is illegal, and there are serious consequences for those who do so. California requires drivers to have auto liability coverage, including bodily injury liability and property damage liability, with minimum liability coverage limits. The state of California wants to ensure that individuals are able to uphold their financial responsibilities, and so auto insurance is mandatory. California has a Low-Cost Automobile Insurance Program for eligible drivers, and there are also optional coverage plans available.

California's minimum liability coverage

California requires all vehicles operated or parked on its roads to have insurance. This insurance must include liability coverage, which compensates a third party for personal injury or property damage caused by the policyholder. California is an at-fault state, meaning the party responsible for an accident must cover the injuries of the other driver and their passengers.

Drivers in California are required to have auto liability coverage, including bodily injury liability and property damage liability, at the following minimum limits: $30,000 for bodily injury liability for one person injured in an accident, $60,000 for total bodily injuries per accident, and $15,000 for property damage liability. These new minimum liability limits will come into effect on January 1, 2025, as mandated by Senate Bill 1107. The previous minimum limits had not been adjusted for over 56 years, and the change provides more protection for California drivers, as medical and repair costs have risen significantly.

If a driver does not have auto liability insurance in California, they can be fined, have their license suspended, and their vehicle impounded. The vehicle's registration will also be suspended until proof of insurance is submitted. The most common way to establish financial responsibility is to buy auto liability coverage. California has a Low-Cost Automobile Insurance Program for eligible drivers.

California also requires uninsured/underinsured motorist coverage for accidents when the other driver is at fault and does not have insurance or does not have enough insurance. Comprehensive or collision insurance does not meet vehicle financial responsibility requirements.

Financial responsibility laws

In California, the term "financial responsibility law" refers to the requirement that drivers carry proof of their ability to cover damages they may inflict in the event of a traffic accident. This usually means having auto insurance. California law states that all drivers and vehicle owners must, at all times, be able to establish financial responsibility and carry evidence of this in their vehicle.

Financial responsibility can be established in several ways. The most common way is to buy auto liability coverage, which includes bodily injury liability and property damage liability. This is the minimum requirement for drivers in California. Liability coverage helps pay for injuries or damage that you cause to others. California law requires drivers to have this coverage, and if they do not, they can be fined, have their licenses suspended, and their vehicles impounded.

Other ways to establish financial responsibility include holding a DMV-issued certificate of self-insurance or a surety bond from a company licensed to do business in California. For those who own or lease a vehicle through a public entity, as defined in California Government Code §811.2, this can also serve as evidence of financial responsibility.

It is important to note that comprehensive or collision insurance and medical pay do not satisfy California's insurance requirements. Additionally, while California has a Low-Cost Automobile Insurance Program for eligible drivers, drivers are not required to carry uninsured or underinsured motorist (UM/IM) coverage. However, this coverage is available and can be beneficial if you are in an accident with a driver who does not have sufficient insurance.

In the event of an accident, drivers must report it to the DMV within 10 days if it caused more than $1,000 in property damage or if anyone was injured or killed, regardless of the severity of the injuries. Failure to provide proof of insurance can result in a suspension of driving privileges for up to four years, and drivers can get their licenses back in the last three years of the suspension by providing and maintaining a California Insurance Proof Certificate (SR 22/SR 1P).

Auto insurance requirements

California has some unique car insurance laws that make insuring a vehicle in the state different from other states. Carrying car insurance is mandatory for all drivers in California. Driving without auto insurance can result in fines, vehicle impoundment, and suspension of your driver's license. In more severe cases, your vehicle's registration may be revoked.

California requires drivers to carry at least the following auto insurance coverages:

• Liability coverage (BI liability and PD liability)
• Uninsured/Underinsured Motorist Coverage

Liability coverage helps pay for injuries or damage that you cause to others. BI liability pays for bodily injury you cause to someone else, while PD liability pays for property damage. Uninsured/Underinsured Motorist Coverage is for accidents when the other driver is at fault and does not have insurance or does not have enough insurance.

California is an at-fault state, which means the party responsible for an accident must cover the injuries of the other driver and their passengers. The average cost of a six-month liability-only policy in California is $80 per month. However, your rate may vary based on your ZIP code, driving history, coverage selection, and the number of vehicles on your policy.

If you cannot afford liability insurance, you may be eligible for the California Low-Cost Automobile Insurance Program.

Uninsured/underinsured motorist protection

In California, all drivers and vehicle owners must, by law, be able to establish financial responsibility and carry evidence of this in their vehicle at all times. The most common way to do this is to buy auto liability coverage. This includes bodily injury liability, which pays for bodily injury you cause to someone else, and property damage liability, which pays for property damage you cause to someone else.

However, if you are in an accident with an uninsured or underinsured driver, their insurance policy might not be enough to cover your damages. In this case, uninsured/underinsured motorist coverage (UMC/UIM) is insurance coverage that can be included in your auto insurance policy in California unless you waive it in writing. UMC/UIM coverage pays out when another driver is at fault but either has no insurance, does not have enough insurance to cover your medical bills and other losses, or flees the scene in a "hit and run" and cannot be found. This coverage allows you to collect damages for medical costs, lost wages, car repair bills, pain and suffering, and other losses.

It is important to note that insurance companies are prohibited by law from offering less coverage and less protection than is required by California's UM and UIM statute. Protection is extended to the "insured" person, regardless of whether they were an occupant of a particular type of motor vehicle. This means that UM and UIM coverage protects you while you are walking or riding a bicycle or motorcycle.

While UMC/UIM coverage is not mandatory, it is highly recommended since the minimum automobile insurance required in California is often too low to cover damages for anything other than minor accidents. It is also recommended that you carry UMC/UIM insurance even if you have a good health insurance plan, as UMC/UIM covers services that regular health insurance plans do not, such as chiropractic care and acupuncture, without the high deductibles and health insurance co-pays.

Average insurance costs

The average cost of car insurance in California is influenced by various factors, including a driver's age, gender, driving history, car model, and coverage choices. California's average car insurance rates also reflect the state's demographics and economics.

For example, young drivers typically face higher car insurance costs due to their increased risk of accidents. In California, auto coverage costs $7,175 annually for a 16-year-old driver, while a driver between 50 and 59 years old would pay around $1,450 per year. Parents adding a 16-year-old driver to their full-coverage policy can expect an average premium of $6,885 per year. When added to a family policy, drivers aged 18 to 25 pay about $2,360 annually, which is 7% less than an individual policy. Gender also plays a role, with women in the same age group paying 7% less than their male counterparts.

Drivers with a DUI on their record pay significantly more, with an average annual cost of $7,315, which is 149% more than the state average. Additionally, rates vary by city, with Los Angeles residents paying 36% more than the state average for full coverage.

The average monthly premium for full coverage in California is $245, and the average cost of a six-month liability-only policy is $80 per month.

Frequently asked questions