California car insurance is not unique in that the state requires drivers to maintain a minimum level of coverage, but it is unique in how insurers in the Golden State determine premiums for its residents.
In the article below, we’ll dive into what California’s car insurance requirements are, the types of coverage available, how car insurance rates are determined, and much more.
Learn more: How does car insurance work? The basics explained.
Basic liability car insurance policies only meet minimum coverage limits required by California law. Basic liability covers you if you injure another person or damage their vehicle or property.
Learn more: What is liability car insurance, and how much do you need?
According to the California Department of Insurance, the minimum amount of car insurance coverage in California for bodily injury is $30,000 per person, with a total of $60,000 in coverage per accident for injuries sustained by multiple people. For physical damage done to property, the minimum amount of coverage is $15,000.
Learn more: Minimum car insurance requirements in all 50 U.S. states
You can opt for policies that go beyond basic coverage. These policies can provide higher liability coverage limits, comprehensive car insurance, collision insurance coverage, uninsured and underinsured motorist coverage, medical payments, and rental car reimbursement coverage.
Learn more: Most common types of car insurance explained
Coverage for loans and leases
If you’ve taken out a loan to purchase your vehicle, then the bank or finance company holding your title will typically require you to buy an insurance policy that contains liability, comprehensive, and collision coverage. Then, after you’ve repaid your loan and the vehicle’s title is mailed to you, you can choose to lower some of the coverages or even switch to a basic liability-only policy.
Learn more: Everything you need to know about car leasing and insurance coverage
If you have limited income and meet certain eligibility requirements, you can purchase a policy that’s even less expensive than a basic liability policy through California’s Low Cost Automobile (CLCA) Insurance Program.
While the liability limits are lower than typical liability policies, they still satisfy state financial responsibility laws. According to the state of California, there are seven payment plans to choose from, and there’s no broker’s fee for qualified Californians.
According to the state’s website, eligibility requirements for CLCA include:
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Annual income is 250% or less of the federal poverty level
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A car worth less than $25,000
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A valid California driver’s license
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Drivers must be at least 16 years old
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Premiums will be higher if the household has a male driver between 19 and 24 years old
Car insurance rates in California must be based on three mandatory factors that are applied in descending order of actuarial weight:
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Driving safety record
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Number of miles driven annually
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Years of driving experience
After that, there are optional factors that may be considered, including type of vehicle, use of vehicle, whether your household has multiple vehicles, and much more. These additional factors must be applied in descending order of weight so there’s less impact on premiums.
The Golden State stands apart when it comes to determining rates.
California is one of several states that now prohibit insurance companies from using credit scores and a person’s gender as factors to determine rates in basic and standard car insurance policies.
California is the only state in the country where insurance companies can’t determine a driver’s rate based on their car’s telematics technology, which measures things like how fast they drive, how hard they break, or whether they’re driving while drowsy, said Stephen Young, senior vice president and general counsel at the Independent Insurance Agents and Brokers of California.
And that’s solely because of the state-mandated formula that car insurance companies must follow to determine rates, created in 1988 after the passage of Proposition 103, Young said.
These limitations have “prohibited auto insurers from being able to apply discounts or use factors that are commonly used in other states that, frankly, are helpful in not only reducing rates, but also in more fairly allocating risks,” Young said.
Indeed, insurers have found that braking behavior is the No. 1 factor that predicts potential claims and loss, said Young.
Prop 103 was passed because, at the time, car insurance rates were rising substantially, and its proponents believed a rigid rate structure could resolve the problem, Young said.
“I think part of that may have been their feeling that insurers were using ZIP codes to increase rates in certain ZIP codes, known as blacklining,” he said. “However, a lot of telematics technology placed in cars in those years wasn’t yet fully deployed, so that data wasn’t considered at all when this rigid rating formula was devised.”
Learn more: How does your ZIP code affect your car insurance?
Another way California car insurance is unique is the “take all comers” provision in the California insurance code, Young says.
It states that if a driver in California meets the “good driver” definition, insurance companies are not only required to sell the driver a policy, but they’re also required to give the driver lower rates than drivers who don’t meet the definition. According to the California Department of Insurance, “your rates as a Good Driver must be at least 20% lower than a non-Good Driver’s rates would be at the same insurance company.”
Moreover, they can never refuse to renew the policy as long as the driver pays the premium, hasn’t committed some sort of fraud, and hasn’t dramatically changed the use of the car.
Under state laws, you must provide proof of insurance when you register your vehicle with the California Department of Motor Vehicles or when you’re stopped by a police officer. Failure to provide proof of insurance may result in fines, suspension of driver’s license, and your vehicle could be impounded.
If a person is found driving under the influence (DUI) of alcohol or drugs or has other types of moving violations on their record, they no longer qualify as a “good driver” in California, Young says. Insurers can sell the driver a policy, but they’re not required to do so. They’re also not required to offer the driver the lowest rate, nor are they required to continue renewing the policy.
Learn more about California’s DUI statutes at the National College for DUI Defense
If you have moving violations on your record, you can get liability insurance through the California Automobile Assigned Risk Plan (CAARP), which assigns you to a particular insurance company. All licensed California insurance companies must offer CAARP, and they must all charge the same premiums. There is no broker’s fee if you buy a CAARP policy, and you can pay in installments if it’s easier for you.
After a certain number of years, your traffic violation or accident may be removed from your record. At that time, you may be able to buy a standard policy.
The California Department of Insurance offers a comparison tool where you can fill in general information such as your driving record, location, and the annual mileage you typically drive. Then, using one vehicle provided by the state as an example, the tool provides sample rates from all the insurance companies offering policies in each county in California.
This can serve as a starting point for cost comparisons in your area since you can contact the insurance companies listed on the tool to obtain actual quotes after providing additional information.
Here are three ways California drivers can save on their insurance, according to Janet Ruiz, spokesperson for the Insurance Information Institute’s West Coast office in San Diego, California:
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Having a higher deductible
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Discounts for safe driving
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Lower mileage on their vehicles
“It’s really important to make sure when you’re shopping for insurance that you compare the coverages as well as the price,” Ruiz said. “If you don’t have comprehensive coverage, then in situations like theft of your auto or damage from wildfires, you would not be covered.”
Learn more: How comprehensive car insurance works and what it covers
If you have an older car, you may choose to either lower the amount of comprehensive coverage to better reflect the value of your aging vehicle, or you may opt instead for a higher deductible to lower your premium.
“It’s important to pay attention to the renewals that you get every year,” said Ruiz. “Make sure you have the right coverages and the right amounts, and if you have questions, don’t hesitate to call your insurance agent and get information.”
Learn more: How to renew your car insurance policy or switch to a new one
Depending on your financial situation, you should choose the appropriate amount of liability protection, which covers the costs of lawsuits if you cause an accident and are sued by the other driver, Young said.
Learn more: What is liability car insurance, and how much do you need?
“If you own a home or other assets that could be taken from you if you lose the lawsuit, you really need liability protection and maybe an umbrella policy to supplement the auto coverage as well,” he said. “But if you’re just a young adult starting out with no assets, it might be more prudent to go with the minimum limits of liability.”
