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You might never have to buy car insurance again

By Susan Ladika Posted : 12/16/2014

Dented car bumperDepending 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, 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.

Two states -- South Carolina and Virginia -- allow drivers to pay a fee of about $500 a year to drive legally without insurance, which is otherwise required at registration. But those drivers are still required to make good on any damage they cause, despite their lack of car insurance. Only a few hundred people take up the offer, officials in those states say.

Options if you don't buy car insurance: deposits, bonds

In other states, you either need to purchase car insurance or prove you can cover your costs.

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 (DMV), post a surety bond for $35,000 or get a self-insurance certificate from the DMV.

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 a lot, depending on your credit history and state laws, among other things. But in general, they range from 1 percent to 4 percent of the surety bond amount if you have good credit. If you paid 4 percent for a $35,000 surety bond, it would be $1,400.

Jan Mendoza, 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 (BMV) 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 license suspended and may be prohibited from registering a vehicle 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, 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, like 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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