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Alternatives to California Auto Insurance

Below are the different types of financial responsibility required in California. An IRS auditor once said "The trick is to stop thinking of it as 'your' money." Except for the liability insurance bundled with Comp & Collision, the other options will not pay for your vehicle in case of an accident. California does not require you to buy auto insurance, only prove you can pay other's damages in case you cause an accident.

• A car insurance liability policy
• A cash deposit of $35,000 with the DMV
• A surety bond for $35,000 from a company licensed with California.
• A DMV issued self-insured certificate

Car Insurance Liability Policy

This is the most popular option in California. The state requires automobile owners in the state to carry liability insurance (with proof) when you registering your car. Coverage minimums in California include a $15,000 for an injury to one person and $30,000 in coverage if more than one person is injured, and an additional $5,000 in property damage protection.

• $15,000 for injury/death to one person.
• $30,000 for injury/death to more than one person.
• $5,000 for damage to property.

You can get quotes on liability policies in the yellow box above. Most people are already familiar with car insurance, even if the language is still gibberish. Liability only insurance will also pay for only damage to another drivers's car, but you can get Comprehensive and Collision coverage to pay for your car.

Cash Deposit

You can also send $35,000 in cash to the California Department of Motor Vehicles to meet the financial responsibility requirement. Then they will not require proof of insurance from you. Since it's a deposit, you can request the money back if you get car insurance at any time. This limit may change, forcing you to send in even more money. The cash deposit is not for you injuries. It does not protect you in an accident. You will probably have to fix the damages to your own car or the other injured driver out of pocket. The cash depositor would be issued a certificate by the California DMV Financial Responsibility Unit as proof of insurance (916) 657-6520.

Surety Bonds

A surety bond is another alternative to auto insurance in California. A surety bond states that the surety will pay the agreed amount if an insurable event occurs; it does not include many features of car insurance. It also does not renew every year, but remains in effect. The minimum surety bond coverage is $35,000. The surety bond does not protect you in an accident it's not to fix damages to your own vehicle. One bond issuer I talked to likened the surety bond to said they were the same as SR22 or high risk insurance, and the same price or higher than auto insurance. However, you don't have to renew! In California, go the Department Of Insurance web site at www.insurance.ca.gov. Go to“Consumer” in red which has a drop down menu. Go down to“Buying Insurance”, then to the right to “Companies by line of business”. Click “Fidelity and Surety” to find surety bond insurers. You can sort by name or market share (Travelers in the Largest).

Self Insured Certificate

The California Department of Motor Vehicles allows business or fleet owners to self-insure. Self Insured Owners set up their own mini insurance company (expensive), so it's not economical unless you own many vehicles. Businesses that own many vehicles can save money by issuing their own insurance policy. It helps if the business is a credit union, or bank or other company that has the infrastructure to maintain insurance on separate vehicles. The business fleet owner would be issued a self-insurance certificate by the California DMV Financial Responsibility Unit for proof of insurance (916) 657-6520.

In review:

• Car insurance is not mandatory, financial responsiblity is.
• Car insurance alternatives only pay for damage to the other driver
• Liability coverage allows you to add comp & collision to cover your car

Written by Craig J. Casey

Financial Writer helping people with their insurance problems on the net since 1998.

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