California Car Insurance Law

California has specific laws and regulations governing auto insurance to protect drivers and promote safe driving practices. Here, we'll explore these laws in more detail.

4/25/20237 min read

california car insurance law
california car insurance law

California Auto Insurance Requirements: A Comprehensive Guide

California Car Insurance Laws and Regulations

California has specific laws and regulations governing auto insurance to protect drivers and promote safe driving practices. Here, we'll explore these laws in more detail, as well as provide relevant hyperlinks to official .gov and .edu websites for additional information.

Financial Responsibility Law

California's Financial Responsibility Law mandates that all drivers demonstrate their ability to cover the financial damages resulting from an accident. The most common way to fulfill this requirement is by purchasing auto insurance with the minimum required liability coverage. Other options include:

  • Obtaining a self-insurance certificate from the California Department of Motor Vehicles (DMV) if you own 25 or more vehicles.

  • Depositing $35,000 in cash with the DMV.

  • Obtaining a surety bond for $35,000 from a licensed California business.

For more information about the Financial Responsibility Law, visit the California DMV's website.

California's Compulsory Financial Responsibility Law (CVC §§16000-16078)

Under the California Vehicle Code (CVC) sections 16000-16078, drivers must carry proof of financial responsibility (i.e., insurance) at all times while operating a motor vehicle. Failure to do so can result in fines and penalties. For more information on the Compulsory Financial Responsibility Law, refer to the California Vehicle Code.

California's Proposition 103

Proposition 103, enacted in 1988, is a California law that regulates auto insurance rates and practices. This law requires insurance companies to justify rate changes and obtain approval from the California Department of Insurance (CDI) before implementing them. Proposition 103 also mandates that insurers offer the Good Driver Discount to eligible drivers. For more information on Proposition 103, visit the California Department of Insurance's website.

California's Low-Cost Auto Insurance Program (CLCA)

To make auto insurance more affordable for low-income drivers, California established the California Low-Cost Auto Insurance Program (CLCA). This program offers liability coverage at reduced rates for eligible drivers who meet specific income and vehicle requirements. For more information on CLCA and eligibility criteria, visit the California Department of Insurance's website.

Automobile Insurance Fraud

California takes auto insurance fraud seriously, and the state has implemented laws to combat this issue. Examples of auto insurance fraud include:

  • Staging accidents

  • Falsifying or exaggerating injury claims

  • Filing false reports of stolen vehicles

Auto insurance fraud is a crime, and penalties may include fines, imprisonment, or both. For more information on auto insurance fraud, visit the California Department of Insurance's website.

Automobile Assigned Risk Plan (CAARP)

The California Automobile Assigned Risk Plan (CAARP) helps high-risk drivers obtain auto insurance coverage if they're unable to find coverage through standard insurance providers. Insurers participating in CAARP are required to accept applicants assigned to them, providing

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those drivers with an opportunity to secure coverage. To learn more about CAARP and the application process, visit the California Department of Insurance's website.

Graduated Driver Licensing (GDL) Program

California has a Graduated Driver Licensing (GDL) program, which is designed to reduce teen driving accidents by providing a more controlled learning experience. The GDL program has three stages:

  1. Learner's Permit: Teens aged 15½ to 17½ must complete a driver education program and pass a written test to obtain a learner's permit. They must be accompanied by a licensed driver aged 25 or older while driving.

  2. Provisional License: After holding a learner's permit for at least six months and completing 50 hours of supervised driving (including 10 hours at night), teens can take a driving test to obtain a provisional license. This license has certain restrictions, such as no driving between 11 PM and 5 AM, and no transporting passengers under 20 without a licensed driver aged 25 or older.

  3. Full License: Upon turning 18 and having no traffic violations or accidents within the previous 12 months, teens can obtain a full driver's license without restrictions.

For more information about California's GDL program, visit the California DMV's website.

California's Automobile Insurance Verification System

The state of California uses an electronic system called the Automobile Insurance Verification System (AIVS) to ensure that all registered vehicles have proper insurance coverage. Insurance companies are required to report policy cancellations, non-renewals, and new policies to the DMV within 45 days. If the DMV doesn't receive verification of insurance, vehicle registration may be suspended. For more information on AIVS, visit the California DMV's website.

California's Automobile Insurance Verification System and Privacy

California's Automobile Insurance Verification System (AIVS) is designed to protect drivers' privacy. The system only allows authorized users, such as law enforcement officers and DMV employees, to access insurance information. Furthermore, the information provided through AIVS is limited to policy status and doesn't include personal details, such as a driver's Social Security number or other sensitive information. For more information on AIVS and privacy, visit the California DMV's website.

Auto Insurance for Ride-Sharing Drivers

Ride-sharing services like Uber and Lyft have become increasingly popular in California. Drivers for these services must carry additional insurance to comply with state regulations. California law requires ride-sharing companies to maintain insurance coverage for their drivers, which includes:

  • $1 million in liability coverage per incident when a passenger is in the vehicle.

  • $50,000 in bodily injury coverage per person and $100,000 per accident when the app is on but no passenger is in the car.

  • $30,000 in property damage coverage per accident when the app is on but no passenger is in the car.

In addition, the ride-sharing company must maintain $200,000 in excess liability coverage. For more information on auto insurance for ride-sharing drivers, visit the California Public Utilities Commission's website.

Introduction to California Auto Insurance Requirements

In California, all drivers are required to carry auto insurance to operate a motor vehicle legally. The state mandates minimum coverage amounts for liability insurance, ensuring that drivers have the necessary financial protection in case of an accident.

Minimum Liability Coverage

California law requires drivers to have the following minimum liability coverage:

  • Bodily Injury Liability: $15,000 per person and $30,000 per accident

  • Property Damage Liability: $5,000 per accident

These coverages help pay for the medical expenses, lost wages, and property damage of other drivers, passengers, and pedestrians involved in an accident where you're at fault. Keep in mind that liability insurance doesn't cover your injuries or damages to your vehicle.

Understanding Uninsured and Underinsured Motorist Coverage

Although not legally required, it's wise to consider uninsured and underinsured motorist coverage (UM/UIM) for additional protection. This coverage helps pay for your expenses if you're involved in an accident with a driver who doesn't have insurance or doesn't have enough insurance to cover your damages. California law requires insurers to offer UM/UIM coverage, but you can choose to decline it in writing.

Optional Coverages to Consider

Apart from the mandatory minimum coverages, you can also add optional coverages to your auto insurance policy for extra protection:

  • Collision Coverage: Covers damages to your vehicle resulting from an accident, regardless of fault.

  • Comprehensive Coverage: Protects your vehicle from non-collision damages such as theft, vandalism, and natural disasters.

  • Medical Payments Coverage: Helps pay for medical expenses for you and your passengers, regardless of fault. Adding these optional coverages can provide you with more financial security and peace of mind.

Choosing the Right Auto Insurance Policy

To choose the best auto insurance policy for your needs, consider the following factors:

  1. Evaluate your risk profile: Your driving record, location, and vehicle type can all impact your insurance rates. Understand your risk factors to choose the right coverage amounts.

  2. Shop around: Obtain quotes from multiple insurance providers to compare coverage options and prices.

  3. Read reviews: Check customer reviews and ratings to gauge the reputation of insurance companies. Taking the time to research and compare policies can help you find the best auto insurance for your needs.

California's Good Driver Discount

In California, insurers are required to offer a Good Driver Discount to drivers who meet specific criteria. To qualify, you must:

  1. Have a valid California driver's license for at least three years. 2

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. Have no more than one point on your driving record. 3. Have no at-fault accidents resulting in injury or death within the last three years.

  1. Not have a DUI conviction within the past ten years.

Eligible drivers can receive a discount of at least 20% on their auto insurance premiums.

Penalties for Driving Without Insurance

Driving without insurance in California can lead to severe consequences, including:

  • Fines ranging from $100 to $200 for a first offense and $200 to $500 for subsequent offenses

  • Vehicle impoundment

  • Suspension of your driver's license

It's crucial to maintain adequate auto insurance coverage to avoid these penalties and ensure you're financially protected in case of an accident.

FAQs about California Auto Insurance

Here are ten frequently asked questions regarding auto insurance in California, covering essential topics and addressing common concerns.

1. How do I provide proof of insurance in California?

You can provide proof of insurance using a physical insurance card, a digital copy on your smartphone, or an electronic printout. Your proof of insurance should include your policy number, insurance company, and coverage dates.

2. Is California a no-fault state for auto insurance?

No, California is not a no-fault state. It follows a tort system, which means the at-fault driver is responsible for the damages resulting from an accident.

3. What happens if I don't have enough insurance coverage in an accident?

If you're at fault in an accident and your insurance coverage isn't sufficient to cover the damages, you may be held personally liable for the remaining costs. It's crucial to have adequate insurance coverage to protect your financial well-being.

4. Can I buy auto insurance without a driver's license in California?

Yes, you can purchase auto insurance without a driver's license in California. However, you may face higher premiums and limited coverage options.

5. How does my credit score affect my auto insurance rates in California?

In California, it's illegal for insurance companies to use your credit score to determine your auto insurance rates. Insurers can only use factors like your driving record, location, and vehicle type.

6. Are there any discounts available for California drivers?

In addition to the Good Driver Discount, California drivers can access various discounts, such as multi-policy, multi-car, safe driver, and student discounts. Ask your insurance provider about available discounts and eligibility requirements.

7. Can my auto insurance be canceled for non-payment in California?

Yes, your auto insurance policy can be canceled for non-payment. If you're struggling to make payments, contact your insurance provider to discuss payment options and avoid cancellation.

8. How long do accidents stay on my driving record in California?

In California, most at-fault accidents remain on your driving record for three years. However, serious offenses like DUIs can stay on your record for up to ten years.

9. What is the average cost of auto insurance in California?

The average cost of auto insurance in California varies depending on various factors, but it's generally higher than the national average. Shop around to find the best rates and coverage for your needs.

10. Can I use out-of-state auto insurance in California?

If you're a California resident or your vehicle is primarily garaged in California, you must have auto insurance issued by a company licensed to do business in the state. If you're moving to California, you'll need to obtain insurance coverage from a licensed provider within a specified time frame.