California Car Insurance Laws

California has the highest number of residents in the country, with a population of 38 million. Among those 38 million people are 27 million licensed drivers who have registered nearly 30 million cars in the state. And each and every one of those cars needs car insurance.

But how much coverage is needed? And what are the car insurance laws to keep in mind as you drive throughout Cali? We’ve got everything you need to know.

Car Insurance Laws in California

Learn everything you need to know about California car insurance below.

Minimum Insurance Requirement in California

• $15,000 per person and $30,000 per accident in bodily injury liability coverage
• $5,000 in property damage liability coverage per accident 1

Penalties for Driving Without Insurance

If you’re caught driving without insurance in California, you may face the following penalties:

• First conviction: $100 to $200 fine, plus penalty assessments, possible vehicle impoundment
• Subsequent convictions within three years: $200 to $500, fine plus penalty assessments, possible vehicle impoundment 2

If you’re involved in an accident without having insurance or proof of insurance, the state will suspend your driving privileges for one year. However, during this time, you may be able to get a restricted license, allowing you to drive under the following circumstances:

• To and from your place of employment
• In the course of your primary employment, when it’s necessary
• While transporting a dependent minor in your immediate family to their primary or secondary institution, if there are no other transportation options available

To get your license reinstated following a suspension, you’ll need to pay a $250 fee and maintain a California SR-22 for three years.

Fault System

California is an at-fault state, meaning that in an accident, the at-fault driver is financially responsible for the other party’s bodily injuries and property damages. Accident victims can sue the other party in a civil suit, regardless of their own level of negligence and even if they hold the majority of the fault.

More Laws to Know

• Credit score: California is one of four states that doesn’t allow insurance companies to base pricing on credit score. That means if you have bad credit, all other things being equal, you should see the same rates as someone with good credit. 3
• Gender: Similarly, insurers can’t take gender into account when it comes to auto insurance pricing, so men and women should have similar rates as well.
• Self-insurance: Looking for alternative types of financial responsibility? If you don’t want to buy insurance from a third party, you can self-insure to the tune of $35,000, either in the form of a cash deposit with the Department of Motor Vehicles (DMV) or a surety bond with a California-licensed company.

More Coverages to Add

California’s required coverage, which is liability coverage only, won’t pay for your property damage, your injuries, or your passengers’ injuries. Full-coverage car insurance, on the other hand, would via the below coverages:

• Medical payments coverage: Otherwise known as MedPay, this coverage would apply to your and your passengers’ medical expenses in an accident you caused.
• Uninsured/underinsured motorist coverage: California has the 10th-highest rate of uninsured drivers in the U.S.: 17 percent compared to a 12 percent national average. 4 What if an uninsured driver hits you? In that case, you could get your damages and injuries covered through uninsured motorist coverage. Underinsured motorist coverage works similarly in accidents caused by drivers who lack sufficient insurance to cover your losses.
• Collision coverage:Collision insurance pays for your property damages regardless of who caused the collision.
• Comprehensive coverage: Comprehensive coverage pays to repair or replace your vehicle due to non-collision incidents, like auto theft, vandalism, and weather-related events such as earthquakes.

California is third in the nation when it comes to the frequency of auto theft, following Colorado and Washington, D.C. In California in 2020, there were 428 auto thefts per 100,000 inhabitants. 5 The city of Bakersfield ranked No. 1 in the nation for auto theft in metropolitan statistical areas (MSAs), with 905 thefts per 100,000 inhabitants that same year.

The Cost of Car Insurance in California

The average annual cost of car insurance in California is approximately $1,200. How does that break down in terms of coverage?

The cheapest California car insurance would be liability insurance only, the minimum coverage required for drivers in California. Additional coverages would add to your upfront expenses, particularly as the state’s cost for collision coverage is the second highest in the nation after Washington, D.C. However, purchasing added protection can save you money in the long run.

Factors That Affect Rates

Why is car insurance in California so expensive, especially if you live in a city like Los Angeles or San Francisco? Here are some factors that dictate insurance rates:

• Marital status: Although insurance companies in California can’t base pricing on your credit score or gender, using your marital status is permitted. Married people will see lower rates than those who are divorced, widowed, or separated.
• Crime rates: More vandalism and auto theft in a neighborhood mean higher car insurance rates. Aside from Bakersfield, other top MSAs in the U.S. for car theft include Yuba City (second after Bakersfield), the San Francisco-Oakland-Berkeley area (fifth in the nation), and the San Jose-Sunnyvale-Santa Clara area (11th). Expect higher car insurance rates if you live in any of those places.
• Population density: More populated areas have more licensed drivers and more registered vehicles on the roads, which leads to a higher likelihood of accidents and claims. In those places, expect higher insurance premiums.
• Weather: California is known for its stunning scenery, but with that comes natural disasters like wildfires and earthquakes, which raise the cost of car insurance.
• Age of driver: Younger drivers with less experience will pay more than more experienced, older drivers (25 and up).
• Vehicle make and model: Your vehicle will have an impact on your rates too. For example, if you drive a BMW with high repair costs, you can expect to pay more for insurance than you would for a Toyota with relatively low repair costs. In the same vein, electric vehicles cost more to insure than gas-powered vehicles due to their specialized replacement parts like batteries.

California has the highest number of registered electric vehicles (EVs) in the U.S., with 563,070 cars registered as of Dec. 31, 2021. That’s 40 percent of all the registered EVs in the nation! 7

Are Inspections Required?

When you register your vehicle in California for the first time or renew your registration, you must undergo a smog inspection. However, there are a few types of vehicles that are exempt from these inspections:

• Diesel-powered vehicles that are from 1997 or prior or have a gross vehicle weight (GVW) of 14,000 pounds
• Electric vehicles
• Gas-powered vehicles that are from 1975 or prior
• Gas-powered vehicles that are less than eight years old
• Natural gas-powered vehicles with a GVW of over 14,000 pounds

Texting and Driving Laws

The average Californian has a one-way commute of 28 minutes, the fifth-longest in the country. 8 Given the congestion on roads, it’s no surprise that 2021 National Highway Traffic Safety Administration (NHTSA) data shows that 3 percent of all of California’s fatal motor vehicle crashes that year involved distracted driving, as people try to entertain themselves in bumper-to-bumper traffic.

To reduce the temptation to engage in distracted driving, California has fines for texting and driving for both teen drivers and drivers over the age of 18.

Recap

Insurance is required to register a car in California, so it’s important to make sure you’re adhering to state guidelines regarding your coverage. Whenever you’re in the Golden State, make sure you’re following the posted speed limit, as well as other rules of the road, to keep your auto insurance rates low.

Citations

1. INSURANCE REQUIREMENTS. California Department of Motor Vehicles. (2023).
   https://www.dmv.ca.gov/portal/vehicle-registration/insurance-requirements/
2. ARTICLE 2. Financial Responsibility. California Legislative Information. (1974).
   https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml
3. Prop 103 Consumer Intervenor Process. California Department of Insurance. (2023).
   https://www.insurance.ca.gov/01-consumers/150-other-prog/01-intervenor/index.cfm
4. One in Eight Drivers Uninsured: $13 Billion Spent in 2016 to Protect Against Uninsured and Underinsured Drivers. Insurance Research Council. (2021, Mar 22).
   https://www.insurance-research.org/sites/default/files/downloads/UM%20NR%20032221.pdf
5. 2019 Crime in the United States. FBI. (2019).
   https://ucr.fbi.gov/crime-in-the-u.s/2019/crime-in-the-u.s.-2019/topic-pages/tables/table-4
6. 2019/2020 Auto Insurance Database Report. National Association of Insurance Commissioners. (2023, Jan).
   https://content.naic.org/sites/default/files/publication-aut-pb-auto-insurance-database.pdf
7. Hybrid-Electric, Plug-in Hybrid-Electric and Electric Vehicle Sales. Bureau of Transportation Statistics. (2023).
   https://www.bts.gov/content/gasoline-hybrid-and-electric-vehicle-sales
8. Commuting Characteristics by Sex. United States Census Bureau. (2023).
   https://data.census.gov/table?q=Commuting&g=010XX00US$0400000