California Drivers Are Not Necessarily Required to Have Auto Insurance

Yes, it is true, technically, the law does not state that drivers in California MUST carry auto insurance.

However, California Vehicle Code Section 1656.2 does have certain "compulsory financial responsibility" requirements most easily met by maintaining valid auto liability insurance that covers, at a minimum, $15,000 for injury/death of one person, $30,000 for injury/death of two or more persons and $5,000 for property damage per accident.

Alternatively, the law allows financial responsibility to be met in one of three other ways: a cash deposit of $35,000 with the DMV, a DMV-issued self-insurance certificate or a surety bond for $35,000.

Now, if someone can actually afford to leave a $35,000 deposit with the DMV, they probably have a lot more assets that could be put at risk without adequate insurance in place. Probably not a good idea. I called the DMV Financial Responsibility Unit. Apparently some people leave the cash deposit who feel they spend too much on premiums over the years. Or perhaps if they import a car that is difficult to insure.

I also asked about the "self insurance" option and laughed when I heard you need a net worth of at least $2.2 million and a fleet of 25 or more cars. Not really geared toward most individuals.

Posting a surety bond for $35,000 is an alternative to insurance but the cost can be significant, generally ranging from 1 to 5% of the value of the bond.

A Low Cost Auto Insurance Alternative

As we know, auto insurance can be expensive. The California Low Cost Automobile (CLCA) Insurance Program was established in 1999 to help income-eligible drivers with good driving records purchase liability insurance that meets State requirements.

To qualify for a CLCA insurance policy, you must 1) have a valid California driver’s license, 2) own a car valued at $25,000 or less, 3) meet income eligibility requirements, 4) be at least 16 years old and 5) have a good driving record.

What are the CLCA income requirements? As of August 2020, income not exceeding $31,900 for a household of one, $43,100 for two, $54,300 for three, $65,500 for four and so on, $11,200 for each additional resident. But one thing to note is that if you use a CLCA policy, then all vehicles in the household must be insured through the program.

CLCA policies only cover very minimal liability insurance, even less than the general California requirements stated above; just $10,000 per person, $20,000 per accident and $3,000 for property damage. I asked if this meets the requirements of the law, and they said it does. Additionally, optional uninsured motorist bodily injury and medical payments coverage is offered, but comprehensive and collision insurance is not.

The current annual cost of CLCA insurance for basic coverage varies by county, ranging from $244 to $966. Discounts apply for licensed drivers with a good driving record for three years.

Visit the CLCA website at www.mylowcostauto.com for details or to sign up.

Carrying Written Evidence of Financial Responsibility

California law requires every driver to carry written evidence of financial responsibility when you renew your registration, are cited by a peace officer for a traffic violation or are involved in any traffic accident. Failure to provide evidence of your financial responsibility can result in fines of up to $500 and loss of your driver's license.

Under California law, if you are involved in an accident that results in damages of over $1,000 to the property of any person or in any injury or fatality, you must file a report with the DMV within 10 days of the accident. If you fail to file a report or fail to provide evidence of financial responsibility on the report, your driving privilege will be suspended for up to four years.

Learn more about filing a Traffic Accident Report (SR 1) at www.dmv.ca.gov/portal/uploads/2020/05/sr1.pdf.