Keeping Coverage Affordable: California Drivers Expect Auto Insurance Rate Increases in 2025

New Legislation Means Many California Drivers Will Need More Coverage in 2025

As 2025 approaches, many California drivers will face another significant auto insurance rate increase. After two years of inflation-related increases, Californians already encounter challenges in securing affordable coverage, resulting in over 4.7 million uninsured drivers in the state.  Senate Bill 1107, which increases minimum insurance requirements, is expected to further drive up premiums statewide. This latest change could disproportionately affect communities where insurance costs already strain household budgets.

Freeway Insurance, which focuses on providing affordable coverage, reports that 98% of California drivers with non-standard auto insurance are likely to be affected by the new wave of upcoming rate increases. To address these challenges, Freeway has access to multiple carriers, enabling customers to compare options and secure the best rates.

“By offering personalized solutions and a variety of carrier choices, we are committed to helping California’s communities maintain their insurance coverage, even as rates rise,” said Cesar Soriano, Freeway CEO. “Our mission is to ensure that drivers have access to essential coverage that meets new legal requirements without overwhelming their finances, helping them stay insured and compliant.”

How can California drivers prepare for this rate increase? Here is a breakdown behind the causes for the rate hikes and some practical tips to help mitigate rising costs.

Average Rates Rising Throughout the Country

California’s insurance rate increases reflect trends observed in many parts of the country in the past two years. In 2024, the average cost to insure a car in the U.S. is $2,388*. That’s a jump of 22% (or roughly $525) over 2023 rates and a 15% (or about $358) increase over 2022.

Consumers may see rate increases each year due to individual factors like driving records, as well as broader issues such as rising repair costs from advanced vehicle technology and the growing frequency of weather-related disasters

All of this and California’s already high cost of living will contribute to the sticker shock many residents will experience when new minimum levels of coverage go into effect on Jan. 1, 2025.

Understanding the Current Landscape of Auto Insurance in California

California’s auto coverage market is unique due to its large population, road congestion, and the presence of non-standard drivers—those with driving infractions, gaps in coverage, or things like a DUI on their record. These drivers are often seen as higher risk by insurers, which can lead to higher premiums even before the 2025 hike.

The state also has strict regulatory practices around auto insurance, with companies required to seek approval from the California Department of Insurance before making changes to their rates. This has kept premiums somewhat controlled over the years, but with several factors aligning—ranging from inflation to legislative updates—drivers are now bracing for a California car insurance increase in 2025.

How Much is California Car Insurance Going Up?

In 2025, California will implement significant changes to auto insurance minimum liability limits due to Senate Bill 1107. For the average driver in California who is already paying more than people in most states, that means auto coverage could rise by as much as 54%. The average cost of an annual car insurance quote in California now is $670 for minimum required liability*. That will likely rise to more than $1,000 in December.

The updates to California insurance coverage minimum limits are:

Understanding the Impact of Uninsured and Underinsured Motorists: Key Statistics and Insights

Insurance experts predict at least 1.66 million California drivers will be impacted by higher rates, a number that could increase depending on how many drivers currently hold coverage at or near the minimum required. According to the California Department of Motor Vehicles (DMV), California has around 27.65 million licensed drivers, meaning approximately 4.7 million of them are uninsured motorists (UM)—a number that could grow as rates rise and affordability declines for some drivers.

Other impacts on California drivers include:

• Uninsured drivers: Approximately 17% of California drivers are uninsured, based on the California DMV estimates of total drivers.  As rates rise, affordability challenges may increase, pushing this number even higher.
• Underinsured drivers: About 6% of California drivers are currently underinsured, meaning their coverage levels are not high enough to fully compensate other drivers and their passengers and property in the event of an at-fault accident. Underinsured motorists (UIM) will be directly impacted by rising rates.

Many insurance professionals recommend those who are due to renew their car insurance soon should take advantage of current rates and renew before the end of the year.

What’s Causing the 2025 Insurance Boost in California?

One of the most significant reasons behind the California car insurance increase in 2025 is legislative. As of Jan. 1, 2025, California will increase its minimum liability insurance requirements, nearly doubling the mandatory coverage for bodily injury and property damage.

These changes provide more protection for drivers involved in accidents but also place a greater financial burden on insurers, who will pass those costs on to consumers in the form of higher premiums.

The Effect of Road Congestion and Accidents on Premiums

California’s infamous road congestion plays a key role in the increasing premiums. More vehicles on the road lead to a higher risk of accidents, which in turn raises the number of claims that insurance companies must cover. According to recent data, accident frequency and severity have both risen over the last few years, largely due to distracted driving, longer commutes, and increasing vehicle speeds.

With more claims to pay out, insurers need to adjust their pricing models to account for the greater financial risk, which leads to higher premiums for drivers across the board.

Other Factors Contributing to Increased Car Insurance Rates

In addition to legislative and congestion-related factors, several other contributors are driving the California car insurance increase in 2025:

• Inflation and Rising Repair Costs: In 2023, according to Consumer Affairs, vehicle maintenance and repair costs rose by 6.5%, driven partly by inflation. However, it’s not just inflation—people are keeping their cars longer, with the average vehicle age in the U.S. now at 12.5 years. Older cars often require more frequent repairs, and modern vehicles add another layer of complexity. Today’s advanced technology not only makes repairs more expensive but also creates challenges in sourcing parts, further driving up costs. As these expenses climb, insurers pass them on to drivers through higher premiums.
• Climate-Related Risks: California is prone to wildfires, floods, and other natural disasters, which can cause significant damage to vehicles. As insurance companies face more weather-related claims, they adjust premiums to offset their financial exposure.
• Vehicle Theft: Vehicle theft rates have been on the rise in California, leading to an increase in comprehensive insurance claims. Insurers compensate for this increase by raising premiums to cover the heightened risk.

Preparing for Higher Costs in California

Although the California car insurance increase in 2025 may be inevitable, there are ways to mitigate the financial impact. By being proactive, drivers can offset some of the costs and find opportunities to save.

Tips to Mitigate the Impact of Rising Insurance Rates

You might already be wondering why your car insurance rates are so high, and the upcoming California rate increase can feel even more frustrating. But there are ways to manage and offset these rising costs. Whether you’re a non-standard driver or simply looking to save, taking proactive measures now can help you reduce your premiums and get the best value for your coverage. Below are some actionable strategies that can help you navigate the upcoming rate hikes and keep your insurance costs manageable.

• Shop Around for Better Rates: Insurance rates vary from company to company. Shopping around and comparing quotes from multiple providers is one of the easiest ways to find more affordable premiums, especially as rates rise.
• Ask for Discounts: Many insurers offer car insurance discounts for safe driving, bundling policies, installing safety features in your vehicle, and driving less. Be sure to ask about all available discounts to reduce your overall premium.
• Increase Your Deductible: Opting for a higher deductible can lower your monthly premium. Just be sure you have enough savings to cover the deductible in case of an accident.
• Consider Usage-Based Insurance: Some insurers offer telematics programs that track your driving habits and adjust your premium accordingly. Safe drivers can benefit from lower premiums through these programs.
• Improve Your Driving Record: For non-standard drivers, avoiding tickets and accidents is key to lowering premiums over time. Consider taking a defensive driving course or other training to improve your driving record.

Insurance accessibility among Californians will likely continue to be a struggle that could become even more problematic for drivers after Jan. 1, 2025. Increased state minimum requirements will help or allow insured drivers to pay for injuries and damages they cause when at fault for an accident. However, high-risk drivers, those with a DUI or other serious infractions, may find it even more difficult to get insured due to increased rates.

*Methodology:  Average costs are based on a 30-year-old male with a Honda Accord with minimum liability. Premiums vary due to factors such as age, deductible amount, liability limits, discount program eligibility, type of car, and more. These factors and unique characteristics specific to each customer are how insurance companies quote insurance policies.