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Several states across the country have just introduced new rules increasing minimum coverage requirements for car insurance in an attempt to better protect owners but it is likely to hit them in the pocket.
Drivers in California, North Carolina, Utah, and Virginia can expect car insurance rates to rise in the near future as a result of the higher mandatory minimum liability limits required as of January 1, according to experts.
Newsweek reached out to Bankrate, Insurance.com, Triple-I, and Insurify for comment on Thursday morning.
Why It Matters
California, North Carolina, Utah, and Virginia have all increased their mandatory minimum liability limits with the idea of helping against the rising costs of car repairs and medical bills. At the moment, the minimum is not enough to cover most claims, Insurance.com wrote.
But this move, in time, will have the likely effect of putting an additional financial burden on car drivers.
What To Know
The cost of car insurance rose considerably last year. According to data from consumer financial services company Bankrate, car insurance rates surged by 26 percent throughout 2024, reaching an average of $2,543 for full coverage.
Considering that the national median household income is $74,580, based on the latest data from the U.S. Census Bureau, Americans spend 3.41 percent of their wages on car insurance, Bankrate reported.
"Residents of California, North Carolina, Utah, and Virginia will likely see even higher premiums next year, albeit with higher protection limits as well," Jessica Edmondson, director of Data Journalism at Insurify, told Newsweek.
"The higher limits should keep more drivers from going into debt after a car accident. But since it increases the financial burden on insurers, they will raise rates to match the new requirements," she added.
"California auto insurance rose 46 percent between January and November of 2024 to an average cost of $2,536 annually," Edmondson said. "California now surpasses the national average cost of car insurance. North Carolina, Utah and Virginia remain below the national average. Car insurance rates will continue to rise in 2025 as insurers try to match rates with risk, but it will likely not be at the same rate as 2024."
"Auto insurance premiums are going to go up," North Carolina State University economist Mike Walden told ABC11. "I think the average household, whatever they would save on this income tax cut, would be more than counteracted by increases in insurance rates."
How Minimum Requirements Have Changed
In North Carolina, a new law that came into effect on Wednesday raised the minimum liability limits for car insurance to $50,000 for one person and $100,000 for two or more people per accident. Property damage coverage will also rise to $50,000 in July—the highest amount in the country.
In California, minimum coverage car insurance requirements have risen to 30/60/15 from 15/30/5 as of Wednesday—the first increase in 56 years. In January 2035, it will rise again to 50/100/25.
In Utah, the limits have increased to 30/60/25 from 25/65/15 as of the same day, and in Virginia, the limits have gone up to 50/100/25 from 30/60/20 with the new year. In the Old Dominion, as of July 1, 2024, all drivers must purchase a car insurance policy.
The figures refer to limits per person, accident and property. For example, in Utah, the only coverage required for auto insurance is the liability limit of 25/65/15, meaning $25,000 per person, $65,000 per accident, and $15,000 for property damage.
Drivers in these states don't have to take any action to adapt to the changes, as it will be up to their insurance companies to adjust their clients' liability coverage levels. What they might notice, however, is that their premium "may increase slightly," as Bankrate puts it. According to the company, the changes will likely be "fairly marginal."
Those who already had coverage limits higher than those that the new regulations are requiring won't be affected by the change.
What People Are Saying
Insurance expert Leslie Kasperowicz wrote for Insurance.com: "Drivers in affected states with minimum coverage will likely see an increase in their car insurance rates. Although some limit increases are minor, such as in Utah, others, like North Carolina, have significant increases. More coverage equals higher rates, although increases will vary."
Bankrate insurance expert Natalie Todoroff: "Keep an eye on your premium, as it could rise slightly to account for the higher limits. Remember, with car insurance, higher coverage limits typically result in higher prices. However, the price increase is expected to be fairly marginal."
Mark Friedlander, director of the Insurance Information Institute or Triple-I, told Newsweek: "Drivers that currently carry bare minimum insurance coverage might experience slight rate increases due to the changes. However, the cost of auto insurance varies based on numerous individual rating factors, including your driving record, claim history, credit record, age of the drivers listed on the policy, city and state where you live, and the make and model of your vehicle.
"Insurance professionals recommend drivers carry liability limits much higher than state minimums for greater financial protection from at-fault accidents—typically 100/300/100 coverage. This means a $100,000 bodily injury liability limit per person, $300,000 bodily injury liability limit per accident and a $100,000 property damage liability limit per accident."
State Farm Mutual Automobile Insurance Co said in a report from AM Best: "These adjustments reflect the growing costs of accidents and the need for adequate coverage."
What's Next
Drivers in the states affected by the new minimum limits would have noticed potential changes in their rates after their policy renewed on January 1 in California, Utah, and Virginia, or, in the case of North Carolina, when it will renew on July 1.
"The new minimum car insurance requirements will cause car insurance premiums to increase, but likely not significantly," Bankrate Insurance Analyst Shannon Martin told Newsweek.
"Looking at national average car insurance rates, raising a policy's liability limits from 25/50/25 to 50/100/50 costs an average of $78 more per year, or $6.50 per month based on November 2024 data," she added.
"However, how much more you will pay will depend on the state and your driving record," Martin said. "The drivers most impacted by this change will be those currently carrying the lowest state limits. If you already have limits higher than the new state limit, you probably won't see an increase related to the new requirements."
The new liability requirements are "likely just a fraction of any increase you may see on your policy," Martin said. "Any rate changes initiated by your carrier or surcharges from accidents and tickets also get tacked on when your policy renews. If your rate seems drastically higher than you expected, talk to your agent about what factors caused the change and about discount opportunities."
Are you a car owner in the U.S.? We'd love to know how you feel about your current car insurance and if you're worried about costs going up. Contact g.carbonaro@newsweek.com.
Update 1/3/25, 10:07 a.m. ET: This article was updated with comment from Jessica Edmondson, Shannon Martin and Mark Friedlander.
About the writer
Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property ... Read more