Car insurance is mandatory in every state. While it's different coverage, it's still required. Car insurance protects you and other drivers in an accident, theft or damage. That includes if your vehicle burned down in the California fires. The unimaginable devastation from fires in California is mind blowing. People lost everything.

Home insurance is different than auto insurance. Typically, if your car burns or is stolen, you will get either full replacement or partial replacement depending upon your policy. Focusing on the fires in California and the thousands of cars, collector cars, and commercial vehicles that burned to the ground, those will get paid out by the insurance company. That is what the policy would state, and each one is slightly different.

So how does that impact you?

Several states across the country have just introduced new rules increasing minimum coverage requirements for car insurance in an attempt to better protect owners. Nevertheless, this insurance is likely to hit them in the pocket. Drivers in California, North Carolina, Utah, and Virginia can expect car insurance rates to rise in 2025 as a result of the higher mandatory minimum liability limits required as of January 1.

You may have had your insurance rates increased dramatically in recent years. There’s a lot of reasons for that, and we’ve covered that on our channel. Sometimes it has to do with data collection. The manufacturers of many vehicles are collecting the data and sending it to the insurance companies because the insurance companies pay for this information. So your data is being shared with multiple buyers including the government as well as other corporations.

When a vehicle is destroyed, it’s typically replaced. Perhaps it's not full replacement value, but still that payout cost the company serious dollars. You can even put an insurance company out of business.

Insurance companies are backed by a reinsurance company. The term reinsurer refers to a company that provides financial protection to insurance companies. Reinsurers handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to.

These horrendous fires in combination with multiple factors, including natural disasters, inflation and the soaring prices of new cars, among others, is projected to send premiums rocketing higher in 2025.

The average price of a new vehicle is almost $50,000, according to Kelley Blue Book, up from roughly $36,000 during 2019 before the pandemic. Higher prices and more expensive parts make it costlier for insurance companies to cover accidents.

The increase in auto insurance premiums in 2024 is just the continuation of companies’ rate hikes in 2023 of 24% nationwide, according to Insurify. In 2024, rates increased again. In some states, rates have increased as much as 61% in Minnesota and 54% in California. 48% on average across the USA. 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.

According to data from consumer financial services company Bankrate, car insurance rates surged to 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.

However, how much more you will pay will depend on the state and your driving record.

Comprehensive coverage protects your car from damage caused by natural disasters and "Acts of God" such as riots, theft and vandalism, as long as you carry the coverage before the damage occurs. This coverage is designed to cover a vehicle in the case of events occurring outside the control of the driver.

Motorists only receive coverage against damage caused by forest fires and wildfires if they maintain comprehensive coverage. As with floods, timing is important: most insurance companies will enact binding restrictions if there is a wildfire in the area.

Most insurance companies issue a moratorium on issuing or binding new policies when a disaster is expected. This typically applies to both home and auto insurance policies. The reason is simple: insurance is meant to protect you in case of an unforeseen event such as a car accident or hitting a deer.

While many natural disasters happen unexpectedly, some events come with advanced warnings. Hurricanes, for example, can typically be forecast many days in advance — though their trajectories can change rapidly. Flooding is another example of a consequence of hurricanes or large amounts of rain, which is why FEMA mandates that a flood insurance policy must be in place for a certain amount of days before it will cover any losses.

Even if you live in an area that is not in immediate danger, these moratoriums are often state-wide.

Car insurance will continue to get more expensive as the cost of cars both personal and commercial get more expensive to buy, maintain and acquire replacement parts. Shop around for the best rates before your old policy expires.

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Lauren Fix, The Car Coach is a nationally recognized automotive expert, media guest, journalist, author, keynote speaker and television host. A trusted car expert, Lauren provides an insider’s perspective on a wide range of automotive topics and safety issues for both the auto industry and consumers. Her analysis is honest and straightforward.