Self-Insured Auto Insurance: California Corporations

In California, car insurance is not mandatory, but drivers must prove financial responsibility in the event of an accident. Self-insurance is an option for individuals or businesses with the financial means to cover any potential costs arising from a car accident. This includes medical bills, car repairs, and property damage expenses. California offers three alternatives to traditional auto insurance: a cash deposit of $35,000, a certificate of self-insurance, or a surety bond, also in the amount of $35,000.

California's Low-Cost Auto Insurance Program

California requires all drivers to maintain evidence of financial responsibility. The California Low-Cost Automobile Insurance Program (CLCA) was established by the Legislature in 1999 to provide income-eligible persons with liability insurance protection at affordable rates.

The CLCA exists as a way to meet California's financial responsibility laws, which require all drivers of vehicles within the state to maintain evidence of financial responsibility. The program is administered by the California Automobile Assigned Risk Plan (CAARP).

To be eligible for the CLCA, your annual income must be 250% or less of the federal poverty level. Your car must be worth $25,000 or less, and you must have a valid California driver's license and be at least 16 years old. There is a higher premium for households with a single male driver aged 19 to 24.

The liability limits for this program are lower than the limits usually required by the state, but they do satisfy the state's financial responsibility laws. The limits are:

• $10,000 bodily injury or death per person
• $20,000 bodily injury or death per accident
• $3,000 property damage per accident

There are seven payment plans available, and there is no broker's fee.

As for self-insured car insurance, it is an option in California. Instead of buying a regular car insurance policy, you take on all financial liability yourself. There are three main ways to self-insure your car: cash deposits, certificates of self-insurance, and surety bonds.

For example, California allows drivers to set aside $35,000 in a cash deposit or surety bond and consider themselves self-insured. However, car accidents can cause significantly more damage than that, so self-insurance may not be the right choice for everyone.

Cash deposits

In California, car insurance is mandatory for all vehicles driven or parked on public roads. However, there are alternative ways to demonstrate financial responsibility, one of which is through a cash deposit.

A cash deposit is one of the three main ways to self-insure your vehicle. Self-insured drivers can choose to make a cash deposit in a savings account and put the account information on file with the DMV. The amount of money required in the account varies from state to state. In California, a cash deposit of $35,000 with the DMV is one way to meet the "compulsory financial responsibility" requirements. The DMV will monitor the account and withdraw money directly to pay for any damage caused in an at-fault accident.

If the account balance falls too low, it is considered the equivalent of allowing your insurance policy to lapse, and you may be penalised as if you were driving without insurance. These penalties can include fines, licence suspension, and registration cancellation.

It is important to note that self-insurance is a big risk and requires the financial means to pay any insurance claims out of pocket. Before choosing self-insurance, individuals should carefully consider their financial situation and the potential costs of accidents.

Certificates of self-insurance

In California, a Certificate of Self-Insurance is one of the ways to prove financial responsibility for a vehicle. The other ways are by obtaining motor vehicle liability insurance, making a cash deposit of $35,000 with the Department of Motor Vehicles (DMV), or obtaining a surety bond for $35,000 from a company licensed to operate in California.

The University of California issues Certificates of Self-Insurance to non-university parties as required by agreement and to evidence the required types of coverages carried by a self-insurance program. The certificates must be issued in the legal name of the contracting party, and the type of coverage and limits should not be greater than what is required by the contract or the self-insurance limits.

In the context of workers' compensation, self-insurance is an alternative to purchasing an insurance policy. Employers who choose to self-insure their workers' compensation liabilities do so for reasons of cost-effectiveness, greater control over their claims programs, and increased safety and loss control management. To receive self-insured status, employers must apply to the Office of Self-Insurance Plans (OSIP) and meet specified financial requirements.

Surety bonds

A surety bond is a legally binding contract that acts as a guarantee that the issuer will pay any debts if the other party fails to do so. Surety bonds are typically used by small businesses to win contracts by providing the customer with a guarantee that the work will be completed.

• The Principal: This party is responsible for obtaining the bond and fulfilling the obligation.
• The Obligee: This party is the one who needs the guarantee by the principal. This can be a company, a government agency, or an individual.
• The Surety: The guarantor of the bond. This party ensures that the principal makes payment.

In the context of auto insurance, a surety bond can be purchased to guarantee that you will cover the costs of any accidents you are at fault for. If you are unable to pay these costs, the surety company will pay them for you and seek repayment later.

In California, a surety bond of $35,000 from a company licensed to do business in the state is one way to show financial responsibility for your vehicle, which is required by law.

California's self-insurance requirements

California requires all drivers to have auto insurance or some form of financial responsibility before driving. While car insurance is the easiest way to meet this requirement, there are other options for proving financial responsibility. However, if you are caught driving without insurance in California, you will likely have to pay fines and surrender your driver's license.

To be self-insured in California, you must meet one of the following requirements:

• Cash deposit: Place a $35,000 cash deposit in a savings account with any bank and submit an application to the DMV Financial Responsibility Unit. Maintain a balance of at least $35,000 in that account, which the DMV can draw from to pay for damages if you are at fault in an accident.
• Certificate of self-insurance: The California DMV can issue a self-insurance certificate if you own more than 25 vehicles in your name. This certificate states that you can cover medical bills, car repairs, and property damage expenses as a minimum-liability policy would. The DMV may require proof that you can meet these financial demands before issuing the certificate.
• Surety bond: Purchase a $35,000 surety bond from a company licensed to do business in California. This guarantees that you will cover medical bills, car repairs, and property damage expenses if you are at fault in an accident. If you cannot pay, the surety company will step in and seek repayment from you later.

Frequently asked questions