California insurance regulations are among the strictest in the country, combining voter-approved rate approval, mandatory minimum coverages, tight claims-handling deadlines, and layered protections for wildfire, health, and life policyholders. The California Department of Insurance (CDI) oversees more than a thousand insurers doing business in the state, and the rules below are the ones that most often affect what you pay, what your policy must cover, and how quickly a claim has to be resolved.
Who Regulates Insurance in California
Two agencies share the work. The CDI, led by the elected Insurance Commissioner, regulates auto, homeowners, life, and most other lines under the California Insurance Code. The Department of Managed Health Care (DMHC) regulates HMOs and certain managed care plans under the Knox-Keene Health Care Service Plan Act of 1975.1California Department of Managed Health Care. DMHC Laws and Regulations Both enforce the California Fair Claims Settlement Practices Regulations. If you’re not sure which agency handles your plan, check the ID card: HMO-style coverage typically falls under DMHC, and traditional insurance falls under CDI.
Auto Insurance Minimums Rose in 2025
Under Senate Bill 1107, California more than doubled its minimum auto liability limits starting January 1, 2025:
- Bodily injury per person: $30,000 (up from $15,000)
- Bodily injury per accident: $60,000 (up from $30,000)
- Property damage per accident: $15,000 (up from $5,000)
The new floor applies to all standard policies issued or renewed in the state.2California Department of Motor Vehicles. Auto Insurance Requirements If your declarations page still shows the old numbers, it should update at your next renewal.3California Department of Insurance. New Year Means New Changes for Insurance
Insurers must also offer uninsured and underinsured motorist coverage at limits matching your bodily injury liability. You can reject it or take lower limits, but only through a signed written waiver.4California Legislative Information. California Insurance Code INS 11580.2
Lower-income drivers whose vehicle is worth $25,000 or less may qualify for the California Low Cost Auto Insurance Program, which carries reduced limits of $10,000 per person and $20,000 per accident for bodily injury, and $3,000 for property damage.3California Department of Insurance. New Year Means New Changes for Insurance
Homeowners and Wildfire Rules
Every residential policy must be issued with a standardized disclosure and a Residential Property Insurance Bill of Rights explaining what’s covered, the limits, and the exclusions.5California Legislative Information. California Insurance Code 10101
Additional Living Expenses After a Declared Disaster
When a covered loss tied to a declared state of emergency makes a home uninhabitable, the policy must provide additional living expenses (ALE) for at least 24 months. If rebuilding is delayed through no fault of the policyholder, the insurer must extend ALE by up to 12 more months, with additional six-month extensions available for good cause.6California Department of Insurance. 2026 Notice – Significant California Laws Pertaining to Residential Property Insurance Policies Watch the dollar cap in your policy alongside the time guarantee; the money can run out before the months do.
The Wildfire Nonrenewal Moratorium
Under Senate Bill 824, insurers cannot cancel or nonrenew residential policies for one year in ZIP codes within or adjacent to a wildfire perimeter after the Governor declares a state of emergency.7California Department of Insurance. Mandatory One Year Moratorium on Non-Renewals The protection reaches homeowners in the affected area, not only those with a direct loss.
Mitigation Discounts
The Safer from Wildfires regulation requires insurers to factor mitigation into rates and to offer discounts for specific measures: a Class A fire-rated roof, a five-foot ember-resistant zone around the structure, ember-resistant vents, double-pane windows, enclosed eaves, and defensible space. Firewise USA neighborhood status and Fire Risk Reduction Community certification also trigger discounts for residents.8California Department of Insurance. FAQ – Safer from Wildfires Regulation
The FAIR Plan as a Last Resort
Homeowners who can’t find coverage through the standard market or surplus lines can buy a California FAIR Plan policy. Residential coverage is capped at $3.3 million; commercial coverage runs up to $20 million per structure with a $100 million maximum per location. Under the state’s Sustainable Insurance Strategy, private insurers must commit to writing coverage in high-risk wildfire communities at no less than 85% of their statewide market share, and mitigated FAIR Plan policyholders get first priority when moving back to private coverage.9Assembly Insurance Committee. The California FAIR Plan
Earthquake Coverage Is a Separate Purchase
Standard homeowners policies do not cover earthquake damage. Insurers must offer earthquake coverage when issuing or renewing a residential policy, and if you decline, they must re-offer it every other year.10California Legislative Information. California Insurance Code INS 10083 Most insurers meet this requirement through the California Earthquake Authority.
Health Insurance Protections
California health plans must comply with the federal Affordable Care Act and additional state rules. Insurers must cover essential health benefits, including preventive services, maternity care, and mental health treatment. Mental health parity laws require that coverage for mental health and substance use disorders be no more restrictive than medical or surgical coverage in cost-sharing, visit limits, or treatment authorization.
Senate Bill 40, signed in 2023, caps insulin copays at $35 for a 30-day supply, bars private insurers and HMOs from applying deductibles to insulin, and prohibits step-therapy requirements for insulin unless the plan covers at least one option per drug type.11California State Senate. Legislature Sends Senator Wiener’s Bill to Cap Insulin Co-Pays
When an insurer denies a treatment as medically unnecessary or experimental, you can request an Independent Medical Review through the CDI or DMHC. Physicians with no financial ties to your insurer conduct the review, and the decision is binding on the insurer.12California Department of Insurance. Independent Medical Review Program
The Genetic Information Privacy Act (Senate Bill 41) prohibits direct-to-consumer genetic testing companies from sharing your genetic data with entities that administer or make decisions about health, life, long-term care, or disability insurance, or about employment.13California Legislative Information. SB-41 Privacy – Genetic Testing
Life Insurance Grace Period and Designee Notice
Every individual and group life insurance policy in California must include a grace period of at least 60 days before the insurer can terminate coverage for nonpayment. Policyholders must also be allowed to name at least one additional person to receive notice if the policy is about to lapse.14California Department of Insurance. Life Insurance Grace Period and Notice to Designees Both rules apply to every life insurance policy in force in California, regardless of when it was issued. The designee provision matters most for older policyholders, where a family member can intervene before a lapse costs the family a death benefit.
Workers’ Compensation Is Mandatory
Every California employer with one or more employees must carry workers’ compensation insurance. There are no industry or size exceptions. Sole proprietors can choose to cover themselves, and corporate officers who fully own their company can opt out, but coverage is otherwise required.15California Department of Industrial Relations. DWC Answers to Frequently Asked Questions
Operating uninsured is a misdemeanor punishable by a fine of at least $10,000, up to one year in county jail, or both. The state can also issue penalty assessments of $1,500 per employee when a stop order is served. For employers uninsured longer than a week, the penalty rises to twice the premiums that would have been paid during the uninsured period or $1,500 per employee, whichever is greater, capped at $100,000.16California Legislative Information. California Labor Code 3722
Rate Approval Under Proposition 103
California is one of the few states where auto, homeowners, and other property and casualty rates require CDI approval before they take effect. Proposition 103, a voter initiative from 1988, prohibits rates that are excessive, inadequate, or unfairly discriminatory.17California Legislative Information. California Insurance Code 1861.05
For auto insurance, the law fixes the three most important rating factors in this order: your driving safety record, annual miles driven, and years of driving experience.18California Legislative Information. California Insurance Code 1861.02 Insurers can consider other factors, but the three mandatory ones must carry the most weight. This departs from the ZIP-code-first pricing common in other states.
Rate filings are public. Consumer advocacy organizations can formally intervene to challenge proposed increases, and the CDI can reject filings that don’t meet the legal standards.19California Department of Insurance. Rate Filing Review Process
Claims-Handling Deadlines You Can Enforce
The Fair Claims Settlement Practices Regulations put every stage of the claims process on a clock. After receiving notice of a claim, an insurer must acknowledge receipt within 15 calendar days and begin investigating.20Legal Information Institute. 10 CCR 2695.5 Once proof of claim is submitted, the insurer has 40 calendar days to accept or deny it, and 30 days after that to pay an approved claim.21Legal Information Institute. 10 CCR 2695.7 If you’re waiting past these deadlines without a written explanation, you have grounds for a complaint to the CDI or DMHC.
Cancellation and Nonrenewal Limits
Insurers cannot refuse to renew a residential property policy solely because a claim is pending, and the SB 824 wildfire moratorium adds an extra year of protection after declared disasters.7California Department of Insurance. Mandatory One Year Moratorium on Non-Renewals Any nonrenewal notice must explain the reason and give you enough time to find replacement coverage.
If Your Insurer Goes Insolvent
When an insurance company fails, the California Insurance Guarantee Association (CIGA) pays covered claims up to statutory limits, using assessments on other insurers rather than tax dollars. For residential property, CIGA pays dwelling damage at replacement cost up to $1 million or the policy limit, whichever is less. Other structures, personal property, and additional living expenses are each capped at $500,000 or the policy limit. Auto, liability, and other claims are paid at full value up to $500,000.22CIGA. Liability, Auto, and Property Claims A high-value home policy can exceed those caps, so checking your insurer’s financial ratings before buying is worth the time.
Penalties When Insurers Break the Rules
The CDI can fine insurers up to $5,000 per violation for unfair claims handling, rising to $10,000 per violation if the conduct is willful.23California Department of Insurance. Applicable Laws and Penalties Those figures apply per act, so a pattern across thousands of claims produces substantial exposure. The CDI can also suspend or revoke an insurer’s certificate of authority, which bars the company from selling policies in California at all.