California will increase its minimum auto insurance requirements this year for the first time in more than 50 years, but the changes aren’t expected to burn a hole in every driver’s wallet.
In 2022, Governor Gavin Newsom signed Senate Bill 1107 (also known as the California Driver Protection Act), which increases minimum auto liability limits. However, the law did not go into effect until earlier this month.
California law requires drivers to carry a minimum amount of liability insurance to help pay for injuries or damages they cause to others.
Prior to the California Driver Protection Act, there were the following minimum liability requirements:
$15,000 for injury or death of one person; $30,000 for injury or death of multiple persons in one accident. $5,000 for property damage.
After the law went into effect on January 1, the minimum requirements also increased.
$30,000 for each injury or death. $60,000 if multiple people are injured or killed in an accident and $15,000 for property damage.
Why is change happening now?
Insurance Commissioner Ricardo Lara previously said that people “expect to be fully compensated by insurance after a road accident, and I think the current minimum level of coverage is correct.” [before the new law] California drivers, especially those in the most vulnerable communities, were often at risk of financial ruin after a single accident. ”
Experts argued that previous minimum liability requirements were insufficient to cover most claims.
Rex Frazier, president of the Personal Insurance Federation of California, said that’s because post-accident repair and medical costs have increased exponentially over time since the pandemic.
Additionally, the minimum limit was set in 1967 and has not kept pace with rising costs, according to the American Agent Alliance.
For example, today, if your car hits someone else’s car in a grocery store parking lot, your car’s bumper now has a lot of technology, including sensors, that will need to be repaired. Repairing that damage could easily cost $15,000 to $20,000, Frazier said.
By increasing the minimum requirements, more accident-related costs will be covered by this insurance.
Who will be affected by the law?
The increase in minimum liability limits would be beneficial for drivers involved in accidents that they did not cause, as they would now be compensated for more accident-related expenses than before, according to the Insurance Information Institute, an industry group. said Janet Lewis, Director of Strategic Communications. group.
Lewis said insurance experts recommend that drivers have liability limits that are much higher than the state minimum to get a higher level of financial protection from at-fault accidents. That’s what it means.
As a result, most drivers have insurance that exceeds the minimum limit.
Drivers with more coverage will see no change in their monthly premiums.
Drivers who currently have minimum insurance coverage may see a slight increase in their premiums due to the changes, Lewis said.
“However, the cost of auto insurance depends on a variety of individual evaluation factors, including your driving history, claims history, the age of the driver listed on your policy, the city and state you live in, and the make and model of your car. ” she said. .
Frazier said the two groups affected by the new law are young drivers and low-income drivers. That’s because younger drivers typically do so because they are required to carry minimum liability insurance, and low-income drivers do so because they can afford it.
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