California’s 2025 Auto Insurance Update: What You Need to Know to Protect Yourself

As of January 1, 2025, California drivers will need to comply with new auto insurance liability limits under Senate Bill 1107 (California Department of Insurance). These updated requirements are designed to provide greater financial protection for drivers, passengers, and pedestrians involved in accidents. If you're a California driver, it's important to understand how these changes impact you and what steps you should take to ensure compliance.

What Are the New Liability Limits?
The new minimum liability coverage limits for auto insurance in California will be:

• $30,000 for bodily injury or death per person (previously $15,000)
• $60,000 for bodily injury or death per accident (previously $30,000)
• $15,000 for property damage per accident (previously $5,000)

These increased liability limits aim to better align auto insurance coverage with the rising costs of medical care and vehicle repairs, reducing the financial burden on accident victims.

Historical Context
The last time California updated its minimum liability coverage limits for auto insurance was in 1967. For over 55 years, the previous limits of $15,000 per person, $30,000 per accident for bodily injury, and $5,000 for property damage remained unchanged. The passage of Senate Bill 1107 reflects the state's effort to modernize insurance requirements in response to rising costs and economic changes.

However, when adjusting for inflation, the 1967 limits would equate to approximately $133,500 per person, $267,000 per accident for bodily injury, and $44,500 for property damage in today's dollars (U.S. Bureau of Labor Statistics). This means that while the new limits are an improvement, they still fall short of keeping pace with rising costs of medical care, vehicle repairs, and legal expenses. As a result, many drivers may still be underinsured despite the increase.

High-Value Vehicles and Insurance Considerations
The new $15,000 property damage limit may still be inadequate for accidents involving high-value vehicles such as BMW, Audi, Mercedes, and Tesla. Additionally, Los Angeles roads are seeing an increase in exotic and luxury brands like Bentley, Rolls-Royce, Lamborghini, Ferrari, McLaren, and Porsche, where repair or replacement costs can easily exceed this limit. Given the rising costs of vehicle repairs and replacement parts, drivers may find themselves financially exposed if they only carry the state minimum.

How Will This Affect Drivers?

1. Potential Premium Increases: Since insurers will be required to provide higher coverage limits, drivers may see an increase in their insurance premiums. However, the exact impact on rates will depend on factors like driving history, location, and the insurance provider.
2. Better Protection in Accidents: With the higher liability limits, drivers will have more financial protection in case of an accident, reducing the likelihood of out-of-pocket expenses if damages exceed the previous minimum limits.
3. Impact on Uninsured/Underinsured Motorist Coverage: Drivers should review their uninsured/underinsured motorist coverage to ensure they are adequately protected in cases where the at-fault driver carries only the minimum required coverage.
4. Rising Personal Injury Settlements and Lawsuit Awards: In recent years, California, especially Los Angeles, has seen an increase in large personal injury settlements and judgments. The introduction of terms like "Traumatic Brain Injury (TBI)" has led to higher lawsuit awards, significantly surpassing the new minimum bodily injury limits. Given the growing legal and medical expenses, drivers should strongly consider carrying higher liability limits to protect against potential financial exposure from personal injury lawsuits.
5. The Influence of Personal Injury Attorneys: Many drivers may not realize how often accidents lead to lawsuits, but personal injury attorneys are aggressively marketing their services throughout Los Angeles. Notably, many of the city's major sports franchises have sponsorship deals with personal injury law firms, a clear indication of the demand for legal services in accident-related claims. The prevalence of advertisements on billboards, radio, television, and even professional sports sponsorships suggests that personal injury lawsuits are becoming more common and more lucrative. This trend reinforces the importance of carrying higher liability limits to avoid financial devastation in the event of a claim.
6. Consequences of Being Underinsured: Many auto insurance policyholders are unaware of the serious consequences they may face if they do not carry sufficient coverage. If a driver is underinsured and found liable for damages exceeding their policy limits, they may experience:
   1. Out-of-Pocket Expenses: The at-fault driver is personally responsible for any amount exceeding their coverage limits.
   2. Wage Garnishment – Courts may order wage garnishment to satisfy unpaid judgments.
   3. Asset Seizure – Personal assets, including homes, savings accounts, and other valuables, could be seized to pay off a judgment.
   4. Legal Costs – Defending against lawsuits can be costly, and legal fees may not be fully covered by insurance.
   5. Bankruptcy Risks – If the financial burden is too high, the at-fault driver may be forced to file for bankruptcy, affecting their financial future.

How to Offset Higher Costs
While increasing coverage may lead to higher premiums, there are ways to offset these costs and keep insurance affordable:

• Bundle Policies – Combining auto and home insurance with the same provider can often result in significant discounts.
• Good Driver Discounts – Maintaining a clean driving record can qualify policyholders for lower rates.
• Usage-Based Insurance – Some insurers offer lower premiums for low-mileage or safe-driving habits monitored through telematics.
• Higher Deductibles – Opting for a higher deductible can lower monthly premiums, but it requires setting aside savings in case of a claim.
• Loyalty & Multi-Vehicle Discounts – Insurers may offer discounts for long-term policyholders or families insuring multiple vehicles.
• Defensive Driving Courses – Taking an approved defensive driving course can lead to rate reductions with many insurers. In California, drivers aged 55 and older may qualify for discounts by completing a Mature Driver Improvement Course, which is specifically designed to enhance safe driving skills for senior motorists (California DMV).

Final Thoughts
While the new auto insurance requirements may lead to higher premiums, they ultimately provide better financial protection for all drivers on California roads. However, the property damage limit of $15,000 may not be sufficient for accidents involving high-value vehicles, and the bodily injury limits may fall short given the rise in large personal injury settlements and lawsuit awards. Taking proactive steps to increase coverage and explore cost-saving options can help auto insurance policyholders ensure they are adequately protected against financial risks.

For more information on how these changes impact your policy, reach out to our team at Schneiderman Insurance Agency. We're here to help you navigate these updates and find the best coverage options for your needs.

​