California is known for being larger than life, and the state’s auto insurance premiums are no exception. With a statewide average premium of $1,962, the Golden State is among the most expensive places to insure your vehicle. However, you shouldn’t fret. With some thoughtful shopping, you can save yourself a pretty penny in no time.
When shopping for your policy, it’s key to remember that every little factor imaginable (and even some that aren’t immediately imaginable) has an effect on the way a quote is calculated. Everything from your ZIP code to your age and your credit score can seriously alter the quote you receive, making it paramount to do some thoughtful shopping of your own. In the end, you’ll be much happier for having spent the extra time to find the policy that works best for you.
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Our Top 5 Picks for the Best Cheap Car Insurance in California
These companies stood out because of their customer support, financial rating and financial stability. Each of them has a “better than most” or higher J.D. Power rating in the California region, as well as a favorable rating from A.M. Best. J.D. Power conducts incredibly thorough customer service satisfaction surveys. A.M. Best takes a look at insurance companies’ financial viability. The combination of high scores from both ratings agencies indicates that the company will have your back if the unthinkable should happen. If you find yourself in a predicament one day, you surely don’t want to be dealing with a wobbly, unresponsive insurance company.
California’s Minimum Coverage Requirements for 2020
The most basic level of insurance coverage required for auto insurance in California is $15,000 for bodily injury per person, $30,000 for total bodily injury for all involved, and $5,000 for property damage, or a 15/30/5 plan. For the companies that offered it via their web tool, you can tack on $1,000 in medical payments coverage, which isn’t required but is a worthwhile investment.
Just in case you’re looking for a workaround, California does offer some ways to meet the state required financial responsibility without purchasing insurance. The driver has to meet/have one of the following requirements:
- A $35,000 cash deposit with the California Department of Motor Vehicles
- A certificate of self-insurance from the DMV
- A $35,000 surety bond from any company licensed in the state of California
Why are California’s rates so expensive?
While there’s a bevy of different factors at play here, the urban population of the state contributes to its higher rates. In general, more urbanized states tend to have more car accidents and car thefts, and California is no exception.
Six California metro areas have landed in the top 10 for car thefts. For instance, Bakersfield had more than 7,000 car thefts in 2016 (putting it third on the list based on population) and Los Angeles had 60,670 thefts, according to a report issued in 2017. Needless to say, that statistic is a guaranteed rate influencer.
What if you’re not a full-time resident?
To purchase insurance in the state of California, you must either be a resident of the state or prove that your vehicle is principally parked there. The only exemption to the rule is anyone with active military status.
Should you get more than minimum coverage?
Unfortunately, it’s likely that you will have to file a claim in your lifetime. Statistics show that the common driver averages an accident every 17.9 years. What’s even more frightening is that the average cost of a nonfatal accident with injuries is $93,800.
It is very easy, even in a relatively simple auto accident, to cause injuries to another person that will well exceed $25,000. If the other vehicle has multiple passengers, it is very easy for injuries you might cause to exceed $65,000 for medical bills, lost wages or lost income, pain and suffering or other kinds of damages.
In most cases, upgrading all the way to a 50/100/50 plan isn’t as daunting of a leap as you might expect. For example, a quote for a 15/30/5 plan with Wawanesa is $1,204. To up your coverage to 50/100/50, the cost goes up to $1,306, and while that’s a $102 difference, it’s a drop in the bucket compared to shelling out of pocket in the event of an accident.
Do you need collision or comprehensive coverage?
When you’re thinking about getting more than the minimum coverage, you may wonder about collision and comprehensive insurance. Collision insurance is used when your vehicle hits an object or another vehicle. It can also be claimed when your car rolls over or when you encounter damage due to road conditions, such as hitting a pothole.
Comprehensive insurance is useful for when you hit an animal, such as a deer, or when a tree branch falls on your vehicle. You can also claim comprehensive insurance when you have damage that is the result of a fire or a natural disaster, such as a hailstorm or a tornado. Finally, comprehensive insurance is what you would use if your car were stolen or vandalized.
Deciding which of these types you need depends on the value of your car, your driving style and risk of having an accident, and the terrain and weather of the area where you live. If you are more likely to have one kind of accident over another, that can help determine your type of insurance.
Is California a no-fault state?
A no-fault state is a state where, regardless of who causes the accident, both parties are covered. California is not a no-fault state, so the person who caused the accident is responsible for the damages.
What is SR-22 insurance?
SR-22 policies are required for people who have gotten into an accident without car insurance, people who have been driving under the influence, and people who have had multiple traffic violations over a short period of time.
In these instances, picking up SR-22 insurance may be required in order for such a driver to maintain a license and registration. This policy can be purchased from your regular insurance provider, but since it’s more of a paperwork requirement than actual insurance, it can be very extensive and therefore expensive. You would be required to maintain your SR-22 insurance policy until the court decides that your driving record is good and that you no longer need to carry it.
Even If You’re Happy, It’s Best to Shop for a New Policy Every Couple of Years
If you’ve been loyal to the same company for years, you might be getting a nice loyalty discount. Why ditch the discount? Well, it might not be much of a discount. Until recently, it was legal in California for car insurance companies to base their rates on a number risk factors, including how willing you’d be to pay a little bit more for your insurance.
This practice, called price optimization, was used by nearly half of insurance companies, according to a study by Earnix. Bob Hunter, the director of insurance for the Consumer Federation of America, likes to call it “profit maximization.” Once a rate is based not on how expensive you are to insure but on how complacent you are as a customer, it’s less about the cost margin and more about simply lifting the profit bar a bit higher.
What’s even freakier is the type of data companies were using to determine that price elasticity — things as seemingly irrelevant as your social footprint and how long you’ve been with your cellphone carrier.
Fifteen states, including California, have addressed price optimization in the form of official bulletins or regulation. The California Department of Insurance issued a notice on Feb. 18, 2015, announcing that “any use of price optimization in the rate-making/pricing process or in a rating plan is unfairly discriminatory in violation of California law.” Even still, shopping around isn’t a bad idea. What could it hurt? Even if you spend an hour getting quotes, just to find out that you’re already paying the lowest rate, that’s even more exciting. It means that you’ve been saving money on unnecessary premiums for years already.
And, those loyalty discounts that feel so warm and fuzzy — some argue that they’re more complicated than they seem at face value. Not only do they incentivize you to not leave your current carrier (because no one wants to lose a discount they’ve “earned” over the years), but because they make rate hikes seem more palatable. Your rate might go up a lot, but the loyalty discount appears to slash most of it, leaving you paying the amount the algorithm predicted wouldn’t bother you. Even though price optimization is illegal in California now, if you haven’t gotten quotes in the past few years, you may still be paying a rate that’s been optimized.
If you’re reading this and thinking, “Hmm, I actually noticed a weird premium increase not too long ago,” call your agent. Call as soon as you can and ask for a full explanation. By law, they’re required to divulge that sort of information, and if the answer seems bogus, you can threaten to leave. (And honestly, that might not be the worst outcome.) An even better idea is to get a few competitor quotes first, so you can see if your current company can match that number.
Keep in mind any mitigating factors in your driving that could affect your premium cost. For example, if you have a new driver on your policy, either a teenager or just a person who has never had a license before, you may find that your insurance cost is higher. This is because insurance premiums are based on prior driving records, and new drivers have no past record.
Another factor that could affect your insurance premium is your credit score. Unfortunately, many insurance companies base their premiums on credit scores, and if yours is below 620, you may be assessed a higher price. There are a few ways that you can bring this cost back down, such as with a discount for good driving.