Avoid These Costly Mistakes: What Every Californian Needs to Know About Car Insurance

Last Updated: July 30, 2025 by Michael Kahn. Published: June 15, 2025.

Car insurance is more than just a legal requirement in California—it’s financial protection, peace of mind, and, in many cases, the only thing standing between a minor mishap and a significant financial setback. But despite its importance, many Californians unknowingly make critical errors when selecting or maintaining their policies. These missteps can result in denied claims, higher premiums, or substantial out-of-pocket costs in the event of an accident.

Table of Contents

• 1. Not Understanding California’s Minimum Coverage Requirements
• 2. Skipping Uninsured/Underinsured Motorist Coverage
• 3. Choosing the Cheapest Policy Without Reviewing the Details
• 4. Failing to Disclose Accurate Information
• 5. Letting Coverage Lapse
• 6. Ignoring Discounts and Bundling Opportunities
• 7. Not Shopping Around
• 8. Misunderstanding Comprehensive vs. Collision Coverage
• Final Thoughts: Take Control of Your Coverage

If you’re a driver in the Golden State, here’s what you need to know to avoid costly insurance mistakes and make smarter decisions about your coverage.

1. Not Understanding California’s Minimum Coverage Requirements

Every California driver is required by law to carry minimum liability insurance. The state mandates at least $15,000 for injury or death to one person, $30,000 for multiple people, and $5,000 for property damage. At first glance, this might seem adequate. But in reality, these limits often fall short of covering the actual costs of a serious accident, especially considering the rising costs of vehicle repairs and medical care.

Many drivers don’t realize that if damages exceed your policy’s limits, you’re personally responsible for the remaining costs. That can mean lawsuits, wage garnishment, or worse. Choosing a policy that only meets the state minimum might keep you legal, but it doesn’t guarantee you’re fully protected.

2. Skipping Uninsured/Underinsured Motorist Coverage

California has one of the highest rates of uninsured drivers in the country. And even when someone has insurance, there’s no guarantee it’ll cover the full extent of an accident. That’s where uninsured/underinsured motorist (UM/UIM) coverage comes in—it helps pay for your expenses if the other driver can’t.

Too often, drivers opt out of this protection to lower their premiums, not realizing the financial exposure they’re creating. If someone crashes into your car and they don’t have coverage—or don’t have enough—you’ll be left to cover the costs on your own unless you’ve added UM/UIM to your policy. It’s not required by law, but skipping it can be an expensive gamble.

3. Choosing the Cheapest Policy Without Reviewing the Details

Everyone wants to save money on car insurance. However, chasing the lowest premium can lead to inadequate coverage and costly surprises. Many bargain policies come with high deductibles, minimal coverage, and a long list of exclusions that can leave you vulnerable when it matters most.

Too often, drivers assume all policies are essentially the same and pick based on price alone. That’s a mistake. The cheapest option can easily become the most expensive in the event of a claim. Taking the time to understand what’s included—and what’s not—can save you a significant amount in the long run.

4. Failing to Disclose Accurate Information

When applying for or updating your insurance, the information you provide directly affects your premium and coverage. That includes your annual mileage, where you park your car, who drives it, and whether you use it for work. For example, with California car insurance, even slight misrepresentations—like underreporting mileage or omitting a household driver—can significantly impact your policy and result in serious consequences.

Providing inaccurate information, whether intentionally or accidentally, can lead to denied claims or canceled policies. It’s tempting to understate your mileage or leave off a teen driver to keep rates down, but the consequences aren’t worth it. Insurance companies verify this data through inspections, credit checks, and even driving apps. If you’re caught misrepresenting details, you’ll not only lose coverage, but you might also have trouble getting insured elsewhere at a fair rate.

5. Letting Coverage Lapse

Letting your car insurance lapse—even for a short period—is a red flag to insurers. In California, it can also lead to penalties, suspension of your vehicle registration, and higher premiums when you reinstate coverage. A lapse suggests that you might be a higher-risk driver, and insurance companies adjust your rates accordingly.

To avoid unintentional lapses, set up automatic payments and keep an eye on renewal dates. If you’re planning to switch providers, line up your new policy before the old one expires. Gaps in coverage—even by just a few days—can cost you much more than you’d expect.

6. Ignoring Discounts and Bundling Opportunities

Many drivers pay more than they should simply because they aren’t aware of the discounts available to them. Insurance companies often offer incentives for maintaining a good driving record, driving low mileage, completing defensive driving courses, or bundling policies, such as home and auto insurance. But unless you ask or proactively check, you might never know what you qualify for.

It’s a good idea to review your policy annually. Your circumstances can change—maybe you drive less than before or recently improved your credit score. These are factors that can work in your favor, but only if your insurer is aware of them.

7. Not Shopping Around

Insurance isn’t a set-it-and-forget-it type of purchase. Rates can vary significantly from one provider to another, even for drivers with identical records. Yet many people stay with the same insurer out of habit or convenience, not realizing they’re overpaying.

What’s more, some insurers raise rates over time for existing customers while offering steep discounts to attract new ones. That means your loyalty may be costing you. It’s worth taking the time to compare quotes every year or two. Even switching within the same coverage limits can lead to substantial savings.

8. Misunderstanding Comprehensive vs. Collision Coverage

These two coverages are frequently confused, but they serve different purposes. Collision coverage helps pay for repairs if your car is damaged in an accident, regardless of who’s at fault. Comprehensive coverage, on the other hand, protects you from non-collision-related incidents like theft, vandalism, fire, or falling objects.

Dropping one or both can lower your premium, but make sure the decision is based on more than just saving money. If your car is relatively new or still under financing, you could be stuck paying thousands for repairs—or even a replacement—without either type of coverage. Understanding the difference ensures you’re not caught off guard by what your policy doesn’t cover.

Final Thoughts: Take Control of Your Coverage

California’s roads are full of variables: dense traffic, uninsured drivers, and rising repair costs. In this environment, car insurance should be more than a box you check to comply with the law—it should be a safety net you can rely on.

By avoiding these common mistakes, you not only protect your wallet but also gain confidence that your policy will do its job when you need it most. Take a moment to review your current coverage, ask questions, and compare options. The best time to fix a coverage gap is before an accident, not after.