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Does California Offer Alternatives to Car Insurance?

    3 minute read

    You’ve heard it over and over again. For as long as you’ve lived in California, you’ve been exposed to the countless reminders and warnings about auto insurance. The fact that the law requires motorists to obtain this type of policy has been driven (no pun intended) into your head. So, to recap: you cannot drive without auto insurance coverage in California.

    Except… that’s not completely true.

    You Can Drive Without Auto Insurance in California

    pile of cashIf you want to get technical about it, there are ways that you can legally drive in the Golden State without having to purchase an auto insurance policy. In fact, California is one of several states that has a “loophole” of sorts when it comes to mandatory auto insurance.

    Why is this? Think about it: as heavily regulated as insurance companies are in California, they’re still private companies. And in most instances, you cannot force a private company to sell one of its products to a consumer. Plus, there are cases where an insurer might deem drivers too risky for auto insurance policies (for example, if they have dozens of moving violations, multiple accidents, and/or several DUIs on their record). That’s why these alternatives to car insurance were established — as sort of a “work-around” for people who cannot qualify for auto insurance in the marketplace.

    Options for Driving Without Car Insurance

    For individual drivers in California, there are two options that will make them eligible to drive legally that don’t involve auto insurance. The first is to make a cash deposit of $35,000 to the state’s Department of Motor Vehicles. These funds are set aside in case the driver does cause an accident, and they are to be drawn upon to pay for property damage and/or medical expenses to the victims. This deposit is refundable (minus any distributed funds for accidents, obviously) whenever the person either gets insurance or surrenders his or her driver’s license.

    The other option is similar in concept, but doesn’t cost nearly as much. A person can purchase a surety bond of $35,000 from an insurance company. Like a bail bond, the customer only has to make a small percentage as a down payment (usually 4% or below, though it can run as high as 15%) instead of forking over the entire amount. However, just like the bail bondsman can demand the rest of the money if the offender jumps bail, a surety bond issuer is entitled to the rest of the funds — or at least a portion of them — if the bondholder gets into an accident. Then the extra money is used to pay the accident victims for damages or injuries.

    Neither Option is Fabulous

    As you can see, obtaining a $35,000 surety bond is a lot more attractive than parting with $35,000 in cash for a deposit. But for most people, securing an auto insurance policy is much easier and no more expensive than a surety bond. And with insurance, your savings is not put at risk of being confiscated in order to pay back the bond in the event of an accident. Therefore, unless you cannot find an insurer who will write a policy for you, it’s almost always better to obtain traditional car insurance coverage rather than choose one of the aforementioned alternatives.

    Auto Insurance Specialists has been providing auto insurance coverage for Californians for over 40 years. They know how to find policies for hard-to-insure drivers, and they’re also skilled at finding competitive rates. So before you even think about looking into alternatives to car insurance, give AIS a call to see if you can get the coverage you need.

    This content is offered for educational purposes only and does not represent contractual agreements. The definitions, terms and coverage’s in a given policy may be different than those suggested here and such policy will be governed by the language contained therein. No warranty or appropriateness for a specific purpose is expressed or implied.