New law increases California’s auto insurance minimums

For the first time in over five decades California is increasing its minimum auto insurance requirements this year, but the change isn’t expected to burn a hole in every driver’s wallet.

In 2022, Gov. Gavin Newsom signed Senate Bill 1107, also known as the Protect California Drivers Act, into law which increases the minimum auto liability limits. However, implementation of the law didn’t go into effect until the start of this month.

California law requires drivers to have minimum liability insurance that helps pay for injuries or damage that you cause to others.

Before Protect California Drivers Act went into effect, the following minimum liability requirements were:

• $15,000 for injuries or death to one person.
• $30,000 for injuries or death to multiple people in one accident.
• $5,000 for property damage.

After the law went into effect Jan. 1, the minimum requirements increased too:

• $30,000 for injuries or death to one person.
• $60,000 for injuries or death to multiple people in one accident.
• $15,000 for property damage.

Why is the change happening now?

Insurance Commissioner Ricardo Lara previously said people expect “to be made whole by their insurance after a traffic accident, but I believe the current minimum coverage levels [before the new law] often left California’s drivers at risk of being one accident away from financial ruin, especially those from our most vulnerable communities.”

Experts argued that the previous requirements for minimum liability limits were not enough to cover most claims.

That’s because the cost of repairs and medical expenses after an accident have increased over time and exponentially so after the pandemic, said Rex Frazier, president of the Personal Insurance Federation of California.

It’s also wasn’t keeping up with rising costs because the minimum limits were set in 1967, according to the American Agents Alliance.

If you bump into someone’s car in a grocery store parking lot with your vehicle today, for example, there’s a lot of technology in a car bumper now including sensors that would need to be fixed. Repairing that damage can easily cost anywhere from $15,000 to $20,000, Frazier said.

By increasing the minimum requirements, more accident-related expenses will be covered by this insurance policy.

Who will be impacted by the law?

Minimum liability limit increases will be beneficial for drivers who are involved in an accident they did not cause because they will be covered for more expenses related to the crash than previously, said Janet Ruiz, director of strategic communication at the Insurance Information Institute, an industry group.

Insurance professionals recommend drivers carry liability limits much higher than state minimums for a greater level of financial protection from at-fault accidents, Ruiz said.

So, most drivers purchase insurance policies that have more than the minimum limit.

Driver’s with more coverage won’t feel the change on their monthly premium.

Drivers that currently carry bare minimum insurance coverage might experience slight rate increases due to the changes, Ruiz said.

“However, the cost of auto insurance varies based on numerous individual rating factors including your driving record, claim history, age of the drivers listed on the policy, city and state where you live and the make and model of your vehicle,” she said.

The two groups of people who are going to be impacted by the new law are younger drivers and drivers who are low-income, Frazier said. That’s because younger drivers typically purchase minimum liability insurance because they have to and low-income drivers purchase it because that’s all they can afford, he said.