California’s home insurance crisis has been squeezing consumers over the last several years through a mix of skyrocketing premiums, dropped policies, and a lack of options in the market.
But it’s not just your house. Prices for other types of coverage — personal liability, automobile, and commercial — have increased as well.
The situation is primed to get worse. President Donald Trump’s recent spate of tariffs could lead to significant increases, particularly in the car insurance market, brokers warn.
“It’s going to be brutal,” said Jerry Becerra, president at Heffernan Barbary Insurance Services. “All these new tariffs are going to have a direct impact on auto insurance premiums.”
Car insurance was already getting more expensive — “galloping ahead for years now,” as Becerra put it. Insurance companies have bumped up their rates, citing inflation and increased repair costs.
Part of the issue is that cars have gotten more complex. In the past, getting rear-ended might have required a mechanic to bang out the dents in the bumper. These days, mechanics might have to replace all the electronic components powering a backup camera and motion sensors. With the tariffs, any replacement parts not made in the U.S. will cost more.
“If automobiles are more expensive and they cost more to repair, that will translate into the comp and collision coverage being much more expensive than it used to be,” Becerra said.
Adam Bakonis, a senior product manager at Mercury Insurance, agreed that tariffs on “imported automotive replacement parts will also increase the cost to repair vehicles,” adding that “social inflation” is driving up costs, too. He’s referring to changes in driving habits (we’re all more distracted on the road), increased attorney involvement, jury verdict patterns, and expected or potential claim values.
As evidence, he cited LexisNexis’ 2024 Auto Insurance Trends report, which found that bodily injury severity from car accidents in 2023 had risen by more than 20% since 2020 and that high claim costs showed “little signs of slowing down.”
The home insurance market could also feel the effects of tariffs. Many California homes are already underinsured, as insurance companies undervalued the costs of rebuilding, leaving policyholders to make up the difference. New tariffs on lumber and shingles — as well as previous tariffs on aluminum and steel — will continue to jack up reconstruction prices, which will have a ripple effect on rates, experts say.
This is amid the backdrop of increased environmental risks from wildfires and other natural disasters.
“Everyone freaks out when their rates go up,” said Karl Susman, president of the Susman Insurance Agency in Los Angeles and an industry analyst. “But we’re going to have to deal with a rebalancing of what we’re used to paying versus what the expenses and exposures are today.”
Liability insurance, known as umbrella insurance, for both individuals and businesses, is also increasing, he added. This type of insurance offers additional coverage for legal liabilities, in situations like car or boating accidents that cause injury, damages to the policyholder’s home that also affect neighbors, and defamation lawsuits. State Farm recently requested a 39% rate hike for its personal umbrella policies in California — its second hike this year.
Susman points to trends in litigation for fueling the rise. For example, litigation financing, which allows third-parties to easily fund lawsuits, has driven an increase in settlements and other outcomes.
“It used to be that a million-dollar umbrella policy was maybe $250 a year, and the likelihood of an umbrella getting used was really low,” he said. “Now, with the amount of litigation and the verdicts that are coming in, these policies are getting maxed out.”
As a result, a million-dollar policy is starting to cost upward of $500, “if you can get it at all,” he said.
Becerra agreed that “the need for an umbrella policy is greater than ever, but they are less affordable than they used to be.” Put another way: “There are consequences to our broken legal system,” he said.