Why Is Car Insurance in California So Expensive?

The average cost of car insurance in California is about 9 percent higher than the national average. However, you can expect steeper premiums for traffic violations, especially if you have a DUI.

Surprisingly, car insurance rates for teen drivers in California are slightly below the national average. Although overall car insurance premiums are more expensive than the national averages, they’re not as high as they could be, considering the state’s population density and uninsured motorist rate. The state regulates auto insurance rates, which we’ll explain in more detail later.

Unlike other states, California has laws that discourage premium hikes. Under Proposition 103, insurance companies must get the state insurance commissioner’s approval for any rate increases for auto, homeowners and other types of insurance.¹

In addition, drivers drove significantly less during the COVID-19 pandemic. As a result, the California Insurance Commission urged insurance companies to refund premiums and freeze rate increases.² Car insurance companies went through years of inflation without hiking rates, and now that driving has returned to normal, accidents have become more frequent again.

Now, the California Department of Insurance is approving these long-awaited rate increases, resulting in major premium hikes for policyholders.

The cost of car insurance in California is also affected by an increasing number of accident-related lawsuits and larger injury settlements. In 2022 (the latest data available), California had one of the highest total costs for personal injury lawsuits — about $72 billion, or $5,429 per household.³ When accidents result in more lawsuits, legal defense costs and settlement amounts drive up premiums for everyone.

Although wildfires are typically associated with homeowners insurance, climate risk also affects the auto insurance market. Comprehensive coverage protects your vehicle against non-collision events, including fire, smoke damage and falling objects.

In recent years, catastrophic wildfires in California have destroyed thousands of vehicles. This risk forces insurance companies to purchase “reinsurance” — insurance for insurance companies — to ensure they can pay out claims during a major disaster. As reinsurance rates climb, so do car insurance rates.

Here’s how environmental factors influence different coverage types:

California is home to some of the most congested metropolitan areas in the United States. Los Angeles, San Francisco and San Diego consistently rank high for traffic congestion.⁴ In places with more traffic, there are also higher rates of accidents.

Research also shows an increase in speeding and distracted driving incidents since 2020, resulting in more fatalities.⁵ Insurers determine premiums by assessing risk, and overall, driving in California is riskier than driving in other areas.

Crime rates play a substantial role in the cost of comprehensive coverage. In 2023, California had the fifth-highest rate of vehicle thefts per 100,000 people in the country.⁶

Beyond full vehicle theft, California has been an epicenter for catalytic-converter theft. From 2020 to 2022, California accounted for at least 37 percent of catalytic-converter thefts in the U.S.⁷ Thieves target hybrid vehicles and trucks specifically for the precious metals inside the converters. A catalytic-converter replacement can range from $1,000 to $3,000 and may also harm the vehicle’s undercarriage. When comprehensive claims rise, insurers adjust rates for the most-targeted vehicle models.

As of 2023, over one-fifth of California drivers were uninsured, and the state ranked eighth in the nation for the percentage of uninsured drivers.⁸ When drivers go without insurance, they don’t contribute to the insurance pool but can still cause accidents. Because insurers end up paying for damages, they increase premiums to reflect the additional costs.

While many of the factors that affect car insurance rates are out of your control, you can take strategic steps to save. Here are some ways to lower your auto insurance costs.

Raise Your Deductibles

If you have an emergency fund, consider raising your deductibles for comprehensive coverage and collision insurance from $500 to $1,000. You’ll need to pay more in the event of an accident, but your monthly premium will drop significantly.

Bundle Policies

When you purchase your auto insurance and your homeowners or renters insurance from the same company, you can save between 10 and 25 percent.

Shop Around Annually

Providers use different algorithms to determine risk. One company might penalize you for driving a specific car model, while another may not. Compare car insurance quotes from at least three companies every year to get the most competitive rate.

Update Your Mileage Estimates

Due to the strict regulatory environment, telematics programs are not available in California. However, some companies offer low mileage discounts for driving under a certain mileage annually (often around 7,500). If you only drive occasionally, contact your provider and see if you qualify for a discount.

California’s car insurance premiums result from several factors, including a necessary catch-up period following premium freezes, as well as traffic density, climate change and high costs of lawsuits. By managing your policy limits, asking about discounts, and shopping the market, you can get the best rates despite rising premiums.