5/10/2012 6:58 PM ET|
Never buy car insurance again?
For most drivers, buying a policy is a no-brainer, but in a handful of states, it's not required. Find out where you can skip the coverage.
Depending on where you live, you may be able to cruise the streets without auto insurance -- and you won't be breaking any laws.
In some states -- such as California, Tennessee, Washington, Texas and Ohio -- it's perfectly legal to skip carrying car insurance if you can prove you have the financial ability to cover liability costs if you get in a wreck. And if you live in New Hampshire, you don't even need to prove your financial fitness.
"New Hampshire is always contrary to other states," says James Van Dongen, a spokesman for the New Hampshire Department of Safety. "The Legislature has never felt that they should compel people to buy insurance."
Although you are not required to have auto insurance in New Hampshire, if you're uninsured and at fault in an accident, you will be required to post a bond or cash equal to the amount of damage you caused in that accident.
Options if you don't buy car insurance: Deposits, bonds
In other states, you need to either purchase car insurance or prove you can cover your costs.
California businessman Michael Reza went the latter route for more than a decade, as he spent his vacations traveling in Europe and purchasing cars in various countries. Because the cars were built to different standards than those sold in the California market, it also made them unique and difficult to replace. They were virtually impossible to insure, Reza says. Insurers couldn't compute a replacement cost for the cars, so they refused to provide coverage for them.
California requires drivers to have liability insurance, with a minimum of $15,000 in coverage for the injury or death of one person, $30,000 for more than one person, and $5,000 for property damage. In lieu of that, a California driver who doesn't want to buy car insurance can make a $35,000 cash deposit with the California Department of Motor Vehicles, post a surety bond for $35,000 or get a self-insurance certificate from the DMV.
Reza had no problem registering the vehicles, which included a Porsche from Germany and a Ferrari from Italy, but because he couldn't purchase auto insurance, he posted a $35,000 surety bond.
Typically, you can obtain a surety bond by paying a fee based on a percentage of the bond amount, and the issuer will extend credit, guaranteeing the full amount. You won't have to pay the full bond amount unless you're in a wreck and need to cover the liability costs. Fees for surety bonds vary greatly, depending on your credit history and state laws, among other things. But in general, they range from 1% to 4% of the surety bond amount if you have good credit. If you paid 4% for a $35,000 surety bond, it would be $1,400.
Reza primarily drove vehicles made for the American market, and the imports were cars he used on occasion, racking up a couple thousand miles per year. While he had some concern about being in an accident with such valuable vehicles, "I was more concerned about liability and other people," he says. "It makes you cautious."
Jan Mendoza, a spokeswoman for the California DMV, says the state doesn't keep track of the number of motorists who don't purchase auto insurance.
Individuals who don't buy car insurance have the financial ability to meet the $35,000 requirement, while corporations with 25 or more vehicles find it more cost effective to self-insure, Mendoza says.
Don't want to buy car insurance? Move to Ohio
Ohio is another state where you can choose between auto insurance and demonstrating the financial ability to cover liability if you're involved in a wreck.
If you choose not to carry auto insurance you must have one of the following:
- A $30,000 bond issued by a surety or insurance company.
- Money or government bonds worth $30,000 on deposit with the state treasurer.
- A certificate of bond issued by the Ohio Bureau of Motor Vehicles worth $30,000 and signed by two people who own real estate with equity of at least $60,000.
The state randomly selects about 5,400 vehicles each week to verify that they're insured, says Ohio BMV spokeswoman Lindsey Bohrer. Vehicle owners are mailed a notice requiring them to prove they have insurance. Those who don't respond or don't provide adequate proof of insurance can have their licenses suspended and may be prohibited from registering vehicles in the state.
Iowa insurance laws: Know the details
While Iowa's law doesn't mandate compulsory auto insurance, in reality drivers must buy car insurance or prove financial responsibility, says Mark Lowe, the director of the Iowa Motor Vehicle Division.
You can register a car in Iowa if you don't have insurance. But if you're stopped by a law enforcement officer, you must have proof of insurance, Lowe says.
If you don't have liability insurance, you must post a certificate of deposit or bond with the secretary of state that shows you have the financial resources to cover $55,000 in injuries and property damages if you're involved in an accident, he says.
Only a handful of individuals choose that option, he says. Typically a big company, such as a car rental agency, will decide to self-insure.
It's a different story in New Hampshire, where no liability insurance is required unless you've been in an at-fault accident. Van Dongen says the state doesn't record how many motorists have decided to go without insurance, but it's a small percentage of the population. He says those who go without "tend to be people with lower incomes, or they're young kids."
Because of that, if you're hit by an uninsured driver, the driver usually is "judgment-proof because he or she doesn't own anything," and instead your uninsured motorist coverage foots the bill, Van Dongen says.
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According to Homeland security there is approximately 15 to 20 million illegals in the US.
How do they get tags or insurance since they are illegal?
I live in NM, a state that requires auto insurace. Why, I'm not quite sure. I've been hit 3 times, by mexicans who HAVE NO car insurance, HAVE NO drivers liense, LIVE ON WELFARE(provided by the good-old USA, of course), and ARE HERE ILLEGALLY. They get off scott-free (not even deportation) and I have to foot the bill, AGAIN! You want to see mexicans scatter? Wear a Border Patrol cap into your local Walmart!
What a stupid article. As if packing up and moving across country is somehow more economically feasible than having car insurance. Who thinks this cr*p up?
"have10 million illegals living here in Cali who not only don't have insurance but also don't pay any taxes"
But California has a population of just under 38,000,000 people. If what you say is true, then that means that almost one in three Californians are illegals.
The spam reporting button is useless! MSN does not take out the repeat offenders!
Wait a second. If you have the cash lying around to put up for the surety bond ($30k or so), then you sure as heck *need* insurance, which for another thing requires you to front a lot less money.
The whole point of having insurance is to protect yourself from catastrophic loss, which exactly what a serious at-fault accident will cause.
The advice in this article is silly.
If you get a ticket and you pay the fine, then you have already paid your due. There is no need to contact your insurance agency and have them raise your rates on you to the point you cannot afford insurance any longer.
However, having to show the ability to pay "if" you are in an auto accident is just another way of letting the rich people get away in not paying for auto insurance like the rest of the people do.
If one class of people have to pay for auto insurance, then the rest need to pony up and pay as well. No exceptions to the rules or the law.
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