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Got $30,000 and hate car insurers?



Ohio financial responsibility lawDriving without auto insurance is a great way to save money -- until you're caught, ticketed, fined, lose your license and then face the certainty of drastically more expensive insurance in your future.

Yet one in six Ohio drivers goes without coverage, according to the most recent figures from the Insurance Research Council.

At least a few of those drivers have paid dearly for the right to legally drive without insurance, plunking down the price of a typical new car. Ohio, like many states, requires proof of financial responsibility for all drivers. (See "Drive uninsured, legally, for $500.") Most people buy insurance, but in Ohio, you can deposit $30,000 with the state or a bond secured by real estate equity of at least $60,000, among other options.

That $30,000 doesn't buy you insurance, and it isn't used to pay for damages from an accident. It covers only the person who posts it. The money doesn't earn interest. In fact, some bonds require a monthly "housekeeping" fee.

All it does is prove to the state that the driver could pay up after an accident, if he or she had to.

'You're on your own'

Ohio is a relatively inexpensive state for car insurance. For coverage on new cars, the state ranked 45th for average rates in 2012, according to Insure.com. For bare-bones legal-minimum liability on an old clunker, the state ranked 39th. (See "This is as cheap as insurance gets.")

Of course, some drivers pay more -- younger drivers, drivers with bad credit, drivers with a DUI or other black mark that requires an SR-22 guarantee.

Even those drivers are usually better off getting their own insurance, says Adele Rapelye, spokesperson at the Ohio Bureau of Motor Vehicles (BMV). "Even people that don't have the best driving records, it's still the best way to go, I think, because you have an insurance company representing you," she says of getting auto insurance.

"If you use this program, you're basically on your own," she says.

The most common use of a bond is by owners of collector cars, Rapelye says. "They are allowed to drive without liability insurance because they have proven themselves to be responsible to the state," she says.

Responsible? Prove it

Ohio law requires drivers to provide proof of financial responsibility after an accident, when stopped by police or when selected randomly by the state. Here are their options:

An insurance card or policy. Legally, drivers choosing this option -- that's most of them -- need a liability policy with limits of at least $12,500 per person injured and $25,000 per accident, and at least $7,500 in property damage liability coverage.

A BMV bond certificate for $30,000 in cash or government bonds on deposit with the state treasurer. You're basically giving the state $30,000 to hold. It can be cash or a physical bond, like the ones school districts sell to build schools, with a maturity value of $30,000. The state doesn't pay interest on any of the bonds drivers give it. Just one Ohio driver is currently using this type of bond, Rapelye says.

A BMV certificate of self-insurance. This is an option for drivers with more than 25 motor vehicles registered in their name or a company's name;

A bond secured by real estate with equity of at least $60,000. The state will put a lien on the property if payout is required. A few dozen drivers in Ohio use this method. It's mostly used by people who own a lot of vehicles, such as classic cars, and are older drivers with excellent driving records who choose not to have liability insurance, Rapelye says.

Unlike auto insurance, bonds don't have to be renewed every year. Participants are sent a letter every five years asking them if they want to continue with the bond on file.

A different kind of bond

Ohio's financial responsibility law also allows drivers to post a cash bond through an insurance company, but these "FR bonds" are usually aimed at drivers who are facing an SR-22 requirement to keep their driver's license, but don't own a car. The insurance company posts a bond, usually the same total bodily injury and property damage amount required of those buying liability insurance. In return, the motorist pays the insurance company a monthly fee that reflects his or her driving record and claims history.

FR bonds aren't the only option for those who need an SR-22 but are without a car to insure. Instead, they can get a nonowners car insurance policy, says Penny Gusner, consumer analyst for CarInsurance.com. "An auto insurance policy is typically easier for a motorist to understand than the bond approach," Gusner notes.

Why so many ways to do the same thing?

Because driving without insurance or one of Ohio's bond options can cost you a driver's license for up to two years. In addition, you could end up with suspended license plates and registration, and even forfeiture of your car for repeated violations.

Of course, you have to get caught first. You can drive carefully and try to avoid accidents or the attention of the police. (See "Do you look like you have car insurance?")

But you can't avoid the hand of fate.

The Ohio BMV sends out 5,400 randomly generated requests for insurance each week, asking drivers to prove they have auto insurance or some form of financial responsibility. The random requests are less expensive to the state than having car registration electronically linked to insurance records, Rapelye says. They're also better than requiring proof of insurance when registering a car, she says, because in the past, the BMV found that many drivers would cancel their insurance after having their car registered.


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