Why Is Car Insurance So Expensive in California?

As of 2021, the average annual rate of car insurance in California is $1,429, making it one of the most expensive states to insure a vehicle. The state’s combination of densely-populated urban centers, high healthcare costs, pricey auto repairs and severe weather and natural disaster risks all contribute to California’s higher-than-average insurance premiums. Fortunately, shopping around can help counter the high cost of coverage.

If you're wondering why the cost of auto insurance in California is so high, several factors influence rates set by insurance companies. Although car insurance rates are increasing across the board, California still has some of the most expensive premiums in the nation, likely because of its dense population centers, high healthcare costs, costly auto repairs and severe weather risks.

Nearly 40 million people call California home, and many of these individuals live in densely-packed cities such as Los Angeles, San Francisco and San Diego. California has a less robust public transportation system than other states with large populations, so most residents drive cars. More drivers on the road mean more traffic and more accidents. Auto insurers in California charge more expensive premiums to account for the higher risks of driving in the state.

It’s no secret that healthcare is expensive in the United States. Data from the California Health Care Foundation predicts that average health spending in the country will grow by 5.4% per year between 2019 to 2028, outpacing the economy's projected growth of 4.3% each year.

California is no exception to these high costs: In fact, another study conducted by the California Health Care Foundation ranked California as the 16th most expensive state in the country for healthcare. When motorists and passengers are injured in a car wreck, insurers pay their medical bills. Since insurers pay more for injury-related claims in California, they have to charge higher premiums to cover these costs.

In their annual ranking, CarMD found that California drivers can expect to pay the highest car repair costs in the country. As of 2020, bringing your car to a repair shop to address a check engine light costs an average of $410.73 in the state.

Since insurers know they’ll pay out more money for auto repair claims in the state, they factor this into insurance rates to help recoup the costs of ensuring Californian drivers.

California is subject to wildfires, droughts, floods and earthquakes, the effects of which can sometimes be catastrophic. Many of these events can damage a car to the point that providers declare it a total loss. Paying out these claims isn’t cheap, so auto insurers charge higher premiums in the state to offset the cost.

Rates of theft and vandalism tend to be higher in densely-populated urban areas, of which California has many. Whether your car is stolen, totaled or parked on a busy road where it's vulnerable to damage, insurers must consider these factors and increase insurance rates accordingly.

Approximately 17% of California drivers don’t have the state minimum amount of auto coverage required. Because of this, auto insurers must consider the added costs if one of their drivers gets into a wreck with someone who doesn't have insurance, which could raise the overall cost of premiums.

If you’re concerned about getting in an accident with an uninsured driver, MoneyGeek recommends purchasing uninsured motorist insurance. While not required in the state of California, this additional coverage can protect you financially after a crash with a driver who doesn’t have insurance.

As of 2021, California drivers paid on average $1,429 per year for auto insurance or $119.08 per month. Between 2015 and 2021, annual rates increased by $119. Currently, California is the 40th most affordable state for car insurance.

Although population density has slightly decreased in the state in recent years, an uptick in natural disasters and weather-related events means that rates will likely continue to increase in the coming years.