California Increases Minimum Automobile Liability Coverages Limits starting Jan 1, 2025.

On September 28, 2022, Governor Newsom signed SB 1107, known as the Protect California Drivers Act, into law. This change was prompted by the realization that California's liability insurance limits, which have not been updated since 1967, were among the lowest in the nation. The new law reflects California's proactive stance towards protective coverages, similar to the recent changes to the Medical Injury Compensation Reform Act (MICRA), which increased compensation for victims of medical malpractice.

New Minimum Auto Insurance Requirements

The updated statute aims to ensure that car accident victims do not incur debt when recovering from injuries caused by negligent drivers. It also provides protection for drivers involved in accidents with uninsured or underinsured drivers. The new insurance limits will take effect on January 1, 2025. It is advisable for drivers to familiarize themselves with these new limits to understand how they might affect compensation after an accident.

Historical Context of Liability Insurance in California

California first implemented minimum financial responsibility laws in 1974, requiring drivers to carry the following minimum liability coverages:

$15,000 for injury or death of one person
$30,000 for injury or death of two or more people
$5,000 for property damage

These laws mandate that drivers must compensate injured parties after an accident, and proof of insurance must be shown to the police to cover any damages and injuries.

Reasons for Increasing Liability Minimums

The costs of medical care and vehicle repairs have significantly increased since 1974. Lawmakers recognized that the outdated minimum insurance requirements were insufficient in covering modern expenses, exacerbated by economic inflation. For instance, the direct costs of motor vehicle injuries in the U.S. in 1975 amounted to $4.773 million. In 2018, motor vehicle deaths in California alone cost $5.83 billion, including $49 million in medical expenses. In 2019, the average cost of a long-term hospital stay was $14,101 nationally. These figures highlight the need for updated insurance limits to prevent out-of-pocket expenses for accident victims.

Impact of the New California Auto Insurance Limits

Effective January 1, 2025, the minimum liability coverage required by the Protect California Drivers Act will increase to:

$30,000 for injury or death of one person
$60,000 for injury or death of two or more people
$15,000 for property damage

These limits will be in place until January 1, 2035, when they will further increase to:

$50,000 for injury or death of one person
$100,000 for injury or death of two or more people
$25,000 for property damage

These changes ensure more substantial coverage for auto accident victims suffering severe injuries due to another driver's negligence. As a result, drivers with minimum liability coverage will need to increase their limits by 2025 and again in 2035.

Drivers also have the option to purchase higher liability limits than the state minimum, providing additional protection against bodily injury and property damage claims if they are at fault for an accident.

Uninsured and Underinsured Motorist Coverage

With the increase in liability coverage limits, uninsured (UI) and underinsured motorist (UIM) coverage must also increase to match these new limits. This expansion offers greater protection in accidents involving uninsured or underinsured drivers. However, if a driver’s liability coverages exceed the new minimums, their UI/UIM coverages can remain at the statutory minimum:

$30,000 for injury or death of one person
$60,000 for injury or death of two or more people

For example, if you increase your liability coverages to $250,000/$500,000, your UI/UIM coverages may remain at the mandatory limits, or you may waive UIM coverage altogether.

Compensation After an Accident

The increased minimum insurance coverage requirements will enhance the compensation available for injuries sustained in a vehicle collision caused by a negligent driver. With higher minimum limits of $30,000, $60,000, and $15,000, victims can seek more substantial compensation for their injuries.

While these new requirements will increase the minimum compensation available to accident victims, they do not affect the determination of fault in California.