Californians saw a notable drop in car insurance costs in 2025, according to a new report from Insurify. The company’s 2026 American Driver Report found that the average annual cost of full-coverage car insurance in California decreased by 8% compared to the previous year, reaching $2,333 at the end of 2025. This figure is $208 less than what drivers paid on average in 2024.
Most of the reduction occurred during the last six months of 2025. Insurance premiums had previously risen each year since 2021 and peaked at $2,589 in January 2025 before beginning to decline in February.
The drop came despite higher minimum liability insurance requirements that took effect in January 2025. Under the new rules, all California drivers must carry at least $30,000 per person and $60,000 per accident for bodily injury coverage, as well as $15,000 for property damage.
Matt Brannon, Insurify’s senior economic analyst and author of the report, explained that several insurers requested permission from state regulators to reduce their rates. “Some California insurers have asked the state Department of Insurance for permission to decrease their rates,” Brannon said. “For example, the state’s largest insurance company, State Farm, has proposed a 6.2% rate decrease that could take effect as soon as late March.”
State Farm attributed its proposal to lower rates to “less costly physical damage claims.”
Brannon noted that fewer accidents and fatalities may also be influencing lower premiums. In early 2025, motor vehicle fatalities dropped by 43% in California based on preliminary data from the National Safety Council—one of the steepest declines nationwide. The number of accidents also fell by about 9%, with California Highway Patrol reporting a decrease from 414,453 crashes in 2024 to 377,410 in 2025. Injuries related to these incidents declined by approximately 8%.
“Fewer accidents mean fewer claims and lower costs for car insurance companies,” Brannon said. “In California, some insurers have decided to pass those savings on to policyholders.”
Insurance rates fell across most major cities except San Francisco, which saw an increase of about 9%. While San Francisco experienced fewer accidents overall compared with the prior year—mirroring trends seen elsewhere—the city’s dense population and high living costs contributed to higher repair expenses and increased risk factors such as theft or vandalism.
Insurify projects a slight increase in average car insurance costs for Californians in 2026—a rise of about 1%, consistent with forecasts for national averages. This would bring the average full-coverage premium up slightly but still below recent peaks.
However, Brannon warned about potential volatility ahead: “We could see increased rate volatility if insurance companies start to feel the impact of tariffs.” He added: “Prolonged tariffs could increase the cost of auto parts, which in turn raises claims costs for insurers. If that happens, companies will likely pass those higher expenses on to policyholders — and a 1% increase could turn into 4% in 2026.”
