California Car Insurance [Rates + Cheap Coverage Guide]

A 2018 Gallup poll reports that 83 percent of Americans drive a car “at least several times a week,” with 64 percent who said they drive “every single day.”

That’s a lot of people who need car insurance since it’s required by law and all. In 2016 there were over 26 million licensed drivers in California alone, which makes this a very important topic.

The problem? Studies show most Americans have huge misconceptions about car insurance. The majority of car insurance customers don’t fully understand what they’re paying for or when the coverage will actually help them. Sadly, many find out when it’s much too late.

Drivers must pay about $1,000 a year in California just to reach the state’s minimum required car insurance coverage. Add even the smallest claim and that number jumps way up.

That’s a lot of money to be spending on something the average American feels (and proves to be) clueless about.

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California Car Insurance Coverage and Rates

Are you tired of spending thousands of dollars on something that you don’t fully see the benefit of?

We are here to help! This guide will break down your seemingly endless policy options, explain why the coverage is important, and help make sense of the confusing lingo agents love to use.

See, you can trust us . . . we aren’t selling anything. Just experts on car insurance who are here to help YOU!

Let’s get this show on the road before you get back on the road without the proper protection for your investments.

– Minimum Car Insurance Requirements in California

Explained: Liability insurance pays all individuals – drivers, passengers, pedestrians, bicyclists etc – who are owed compensation for property damage and/or injuries resulting from a car accident that you or anyone under your policy causes.

Your liability coverage will be in effect when any family member – or anyone you have given permission – is driving your vehicle. In California, this usually covers you in a rental car as well.

Broken Down: California law requires this minimum liability coverage as protection for others in the event you cause an accident:

• $15,000 for injury or death for one person
• $30,000 for injury or death if there’s more than one person
• $5,000 for damage to property in an accident

Remember: These are only bare-bones coverage amounts. This is just what California motorists are required to have to drive – in order to not be a LIABILITY to all others on the roads around them.

In the tragic event of a deadly crash, there will be extensive injuries, damage, or possibly deaths. If you are found to be at fault, you alone will be held financially responsible. Minimum coverage will quickly run dry.

Can’t afford the minimum car insurance in California? See if you qualify for CLCA – discussed in detail below.

– Required Forms of Financial Responsibility in California

California law requires every driver and every owner of a vehicle to have proof of financial responsibility (proof of liability coverage) at all times.

Here are the four acceptable Forms of Financial Responsibility:

1. Liability insurance policy card
2. Receipt of deposit of $35,000 with the California DMV
3. Surety bond for $35,000 obtained from a company licensed to do business in California
4. Self-insurance certificate issued from the California DMV

Every time a motorist operates a vehicle he or she is required to have – on hand – one of the above four forms proving financial responsibility. This form must be available to show an officer at a traffic stop or after an accident.

If you fail to show proof of financial responsibility in California, you face a fine or having your vehicle impounded. Don’t let that be you!

Now let’s look at how much California residents are making versus how much they’re spending on car insurance.

– Premiums as Percentage of Income in California

In 2017, the annual per capita disposable personal income in California was $49,731.

Clarification: disposable personal income (DPI) is the total amount of money available for an individual to spend (or save) after their taxes have been paid.

The 2017 annual minimum coverage car insurance in California cost $1,120, which was over two percent of the average disposable personal income.

The average Californian has only $4,144 each month to buy food, pay bills etc. The car insurance bill alone will deduct about $100 out of that – and much more for anything over the minimum coverage and/or with a less-than-perfect driving record.

American Consumer Credit Counseling suggests saving 20 percent of every paycheck.  With California’s DPI, that’s a whopping $829 each month! How much are you putting aside for savings?

– Core Car Insurance Coverage in California

The above table illustrates the most recent data provided by the leading source on the matter, the National Association of Insurance Commissioners. Expect car insurance rates in California to be significantly higher for 2018 and on.

Don’t forget: California has minimum requirements for liability coverage, but experts suggest drivers purchase more than what state law requires especially when the coverage amounts are as low as 15/30/5.

Great News! In California insurance providers are not allowed to increase your rates due to a claim when you were not found to be “at fault” for the accident.

Let’s dig into some of the most popular coverage options to add to a basic auto insurance policy.

–  Additional Liability Coverage in California

Fact: Med Pay, Uninsured, and Underinsured Motorist coverage are all optional in California, but they’re still important to have. Why? In 2015 15.2 percent of motorists in California were uninsured – these drivers would likely go bankrupt before they could pay off bills for damage and injuries they caused in a car accident.

California is ranked 12th in the nation for having such a high percentage of drivers choosing to ignore the minimum required car insurance laws.

The Golden State’s falling behind: The consecutive years of declining loss ratios seen above are concerning for the insurance customers. In 2015 the top insurance companies in the U.S. had loss ratios that ranged from 94 to 112 percent, which is far from what we’re finding in California.

Car insurance providers paid for claims amounting to only 60 percent of the premiums California residents paid on average in these two categories in 2014. Real-time example of a 60 percent loss ratio: you pay $1,000 for coverage and your provider pays $600 for damages — nope, not impressive.

Here’s how the attorneys at Murphy & Prachthauser explain it:

“Lower pay loss ratio means the insurance company is paying more for salaries, defense costs, and advertising, rather than paying the policyholders who purchased their coverage. All other things being equal, try to find car insurance companies with a higher pay loss ratio.”

– Add-ons, Endorsements, and Riders in California

We know getting the complete coverage you need for an affordable price is your goal.

Good news: there are lots of powerful but cheap extras you can add to your policy.

Here’s a list of useful coverage available to you in California:

• Guaranteed Auto Protection (GAP)
• Personal Umbrella Policy (PUP)
• Rental Reimbursement
• Emergency Roadside Assistance
• Mechanical Breakdown Insurance
• Non-Owner Car Insurance
• Modified Car Insurance Coverage
• Classic Car Insurance

You can also save money if you don’t drive much. Read on to find out how!

– Pay-As-You-Drive or Usage-Based Insurance in California

Motorists across the U.S. are putting tracking devices in their vehicles and with safe-driving reports, they’re shaving nearly $300, per car, off their premiums! Sounds like a major win for safe drivers, right?

Well, California’s Department of Insurance doesn’t see it that way. Legislators identify two major problems:

1. Lack of privacy: motorists can be tracked and their destinations can be saved
2. Unfair judgment: motorists shouldn’t be charged more because they drive through (or to) poor areas

California only allows insurance providers to track mileage and adjust premiums accordingly. Throughout the state, insurers are not allowed to discount or up-charge based on driving behavior.

Usage-based insurance can still be beneficial for California drivers; take this quiz to see if you’re a good candidate.

Actually, there’s more (scroll down) that California motorists might find is unfair about their car insurance rates.

– Male vs Female Annual Car Insurance Rates in California

Popular myth: men pay more for car insurance. In most states that isn’t always true, and California is one of them.

In California, both Geico and Progressive charge females more than males who have the exact same profile and driving record.

How much more!? Our researchers discovered that females in California are charged as much as $50 a year more than males who are the same age and have identical backgrounds and driving records.

There are other key factors that play major roles in determining an individual’s car insurance rates. See the annual premiums below we collected with the help of Quadrant Information Services:

But, maybe those gender rate differences are a thing of the past considering the new law that was just passed:

“California Insurance Commissioner Dave Jones has issued new regulations that prohibit the use of gender in private passenger automobile insurance rating in California. The Gender Non-Discrimination in Automobile Insurance Rating Regulation became effective on January 1, 2019.” 

This is Jones’ third attempt since 2009 to remove gender as a price-setting factor. Hopefully, this one will stick.

– Cheapest California Car Insurance Rates by City and Zip Code