What California’s New, Higher Liability Limits Mean for Auto Premiums | Insurify

California's auto insurance costs have climbed steadily over the past few years and could increase even more in 2025, when the state's higher liability insurance requirements begin.

The Golden State is more than doubling its mandatory liability limits starting Jan. 1, 2025. Previously, California was among the five states with the lowest requirements. The need to keep pace with higher vehicle repair and medical costs likely prompted California to increase its car insurance requirements, Mark Friedlander, director of corporate communications for the Insurance Information Institute (Triple-I), told Insurify.

The new limits take effect in January and will impact new and renewing policies.

How this could affect auto policyholders

State insurance regulators expect the price of car insurance to increase because of the new mandatory limits. But the exact increases remain unknown.

California's auto rates are already above the national average, according to Insurify's auto insurance report. Drivers in California pay an average of $287 per month for a full-coverage policy and $140 per month for a liability-only policy.

The national monthly averages are $204 for full coverage and $104 for liability-only coverage.

These potential new rate increases mark a blow for consumers in a state where insurance rates were already rising rapidly. Insurify data analysts predicted a 54% increase in California car insurance rates in 2024, and rates had already increased 45% by June.

"The increases that have occurred have been largely driven by a continuation of people driving more, resulting in an increasing frequency of claims and inflationary pressures related to vehicle prices and repairs," Gabriel Sanchez, a spokesperson for the California Department of Insurance, told the Los Angeles Times in August.

Low-income driver program could spike in popularity because of new requirements

As premiums on standard policies increase, state regulators expect lower-income drivers to search for alternatives. California's Low Cost Auto Insurance program (CLCA) could become "the only viable option," the state insurance department wrote in a July news release.

The CLCA's coverage limits are lower than California's standard liability requirements. With the state's new, higher limits, drivers with CLCA policies will carry liability coverage that's a third or less of the state's standard coverage.

CLCA coverage requirements will remain at their current levels. California drivers can qualify for the CLCA program by having a valid license, meeting income requirements, owning a vehicle valued at less than $25,000, and having a good driving record

Here's how the CLCA coverage limits compare to California's current and updated standard liability limits.

What's next? Consumers search for affordable options

Since experts expect California's increased liability requirements to influence premiums, drivers across the board may start to feel the squeeze in the new year.

For consumers looking for lower rates and better coverage options, Triple-I's top two recommendations for lowering auto insurance costs are to shop around and compare at least three quotes before settling on a new insurer. Triple-I also recommends bundling insurance policies, taking advantage of discounts, and reducing optional insurance on older cars.

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