California commercial auto liability minimums increase

Why did California increase auto insurance liability minimums?

The new liability requirements are the first increase to California minimums in more than 50 years. Since then, the cost of healthcare and auto repair has increased considerably, which has left many car owners underinsured, according to the Automobile Club of Southern California. The new minimums provide greater assurance that funds will be available to cover the cost of injuries and damages from auto accidents.

Indeed, there’s been an uptick in collisions and risky driving behaviors on California roads in just the past few years. Traffic fatalities in the state increased 7.6% from 3,980 in 2020 to 4,285 in 2021, according to a 2023 report from the California Office of Traffic Safety. 

Until Senate Bill 1107, which was passed in September 2022 and increased the minimums, California had the lowest liability limits in the country.

Because of inflation, the strength of California public policy requiring drivers to be financially responsible for their actions on the road has slowly but significantly eroded, per a 2022 California Senate statement about the bill.

“A clear benefit of raising the limits is the larger influx of cash that would be available for victims of accidents to recover. Costs for vehicle repairs, medical services, and emergency services have all steadily risen over time, and according to supporters, CDI data suggests that 32% of accidents in 2022 will have bodily injury claims exceeding the minimum limits,” the statement says.

Starting in 2025, all California commercial auto insurance policyholders – which covers cars, trucks and vans used for business purposes such as deliveries and service calls – must provide proof of financial responsibility and carry the increased liability coverage minimums. 

The Senate bill also outlines additional increases to $50,000/$100,000/$25,000 effective January 1, 2035. If no other states make similar changes, these would be the country's highest mandatory financial responsibility limits.

How will the new insurance requirements impact commercial auto insurance policyholders?

The updated liability minimums will automatically take effect for all existing policyholders during their renewal period. Small business owners should contact their insurer to see what the impact on their rates might be. Not all insurance customers will see an increase.

“Auto insurance policyholders who already carry the new limits of liability or higher limits will not see changes in the policy limits unless they request them through their current insurance company,” says Janet Ruiz, director of strategic communications at the Insurance Information Institute, an insurance industry group.

The new minimums, however, are just that – liability minimums. 

Since drivers with commercial car insurance use their vehicles for business, including deliveries, services and hauling, experts say they should have more insurance than the new minimums. Business owners should talk to an insurance agent or their insurer to figure out what coverage level will best protect their businesses and ways they might be able to save.

“It may be a good time to review all your coverages and potential discounts,” Ruiz says

Commercial auto insurance cost-saving strategies 

If your commercial auto insurance rates do increase, there are a number of cost-saving strategies that can offset the price of a higher premium:

Bundling policies: Many insurers offer premium discounts when you bundle policies, such as commercial auto and commercial property. 

Comparing rates: Shopping around for new commercial auto insurance may be a great savings strategy. Generally, it’s good to talk to three to five insurers and see what quotes they can offer you. Experts recommend reviewing your policy annually or after big life events.

Exploring car insurance discounts: Most insurers offer telematics, electronic payment and other money-saving programs. 

Increasing your deductible:You could save 15% to 30% annually by increasing your deductible by a few hundred dollars. Remember, you should have funds to cover any out-of-pocket costs. 

While attention is focused on the new liability minimums, it's also wise to look at all your coverage options. Liability is just one type of commercial auto insurance coverage. There’s also:

• Collision coverage, which covers vehicle repair or replacement costs from accidents, regardless of fault. 
• Comprehensive coverage, which covers non-collision incidents like theft, vandalism or weather damage. There have been sharp increases in theft, vandalism and weather incidents in certain states, so it may be more necessary than it seems. 

When liability is combined with collision and comprehensive insurance you have what’s known as full coverage insurance. This is often the most expensive vehicle insurance option. However, it’s a good idea to price shop and consider your out-of-pocket expenses and impact on your business before determining what coverage you need. 

Sources:

• California Department of Insurance. “Insurance requirements.” Accessed January 2025.
• California Legislative Information. “Senate Bill No. 1107.” Accessed January 2025.
• Consumer Watchdog. “Commissioner Lara approves over a $1 billion in unjustified auto insurance rate hikes.” Accessed January 2025. 
• Insurance Information Institute. “Nine ways to lower your car insurance costs.” Accessed January 2025. 
• National Highway Traffic and Safety Administration (NHTSA). “Continuation of Research on Traffic Safety During the COVID-19 Public Health Emergency: January – June 2021.” Accessed January 2025. 
• Nordstrand Black Law. “How Senate Bill 1107 affects car insurance claims.” Accessed January 2025.
• State Farm Newsroom. “Understanding California’s new auto liability coverage law.” Accessed January 2025. 
• TRIP. “News release: California traffic fatalities surged 22 percent from 2019 to 2022.” Accessed January 2025. 

What our expert says

Q: If I carry liability coverage higher than the new California minimum, will anything change for me?

Janet Ruiz The Insurance Information Institute’s director of strategic communications.

"Auto insurance policyholders who already carry the new limits of liability or higher limits will not see changes in the policy limits unless they request them through their current insurance company."