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Should You Self-Insure Your Car?

Buying insurance is about reducing risk and protecting drivers. In most states, car insurance is not just a responsible choice. It’s a legal requirement to register your vehicle. 

In Florida, qualified drivers are afforded the option to independently reserve liability coverage in order to significantly reduce their premiums or pay an insurance company to set aside that coverage for them. Before applying for self-insurance, it’s important to understand the risks and costs of forgoing traditional insurance coverage. 

What is self-insurance?

Choosing to fully self-insure your car means that you will assume the financial burden after an accident. Self-insurance mitigates that risk by requiring cash reserves to pay for damages to others’ property as well as your own. In other states, the cash reserve may be in the form of a bond or deposit made to the state’s DMV that proves an ability to pay. 

However, the Florida Legislature removed surety bonds as a means of obtaining self-insurance in 2013. Instead, Florida drivers need to prove a net unencumbered worth of at least $40,000.  

But self-insurance is not always an all-encompassing choice. 

Just as insurance companies offer lesser and greater coverage with corresponding premiums, many drivers engage in a type of self-insurance by opting out of optional coverage. For example, choosing not to add uninsured motorist insurance (UM/UIM) means that you’ll be responsible for paying any resulting medical bills, lost wages, and long-term nursing care if the at-fault driver is uninsured. 

What are the differences between car insurance and self-insurance? 

Beyond the benefits of self-insuring, such as reduced or eliminated car insurance premiums and less lengthy claims, risks also include complete financial and legal liability. Understanding the differences can help you make an informed decision before you choose to fully self-insure. 

  • Insurance payments. Traditional car insurance companies require you to pay a monthly premium based on varying factors: the make and model of your car, your driving habits, and demographic factors. But to obtain self-insurance in Florida, you forgo premiums by applying for a self-insurance certificate and maintaining a sufficient unencumbered net worth.
  • Coverage limits. Florida law requires that all drivers carry specified amounts of car insurance coverage: property damage liability (PDL) of $10,000 per accident and personal injury protection (PIP) of $10,000 per accident. If you carry the minimum amount of liability insurance required by the state, you will only be required to pay for damages that exceed your coverage limits. As a self-insured driver, however, it is your responsibility to pay for all damages. 
  • Legal liability. Insurance companies are for-profit businesses that do not want to pay out for claims that could be settled or litigated on behalf of an insured party. However, if you are self-insured, you are solely responsible for hiring representation and paying for legal fees. 

Who should self-insure? 

Everyone is self-insured to some extent if you forgo alternative types of coverage (e.g. collision, comprehensive, and medical payments). However, a person should only fully self-insure vehicles when they possess enough money to cover potential damages with savings and assets. 

  • Corporations or businesses with a fleet of vehicles. A business with a vehicle fleet may opt for self-insurance as a form of strategic risk management. When the cost to insure their commercial vehicles is greater than the cost of damages in a potential accident, a business may decide to self-insure. 
  • Individuals who are independently wealthy. A self-insurance fund, or assets worth equal to the minimum required net worth, are necessary to self-insure in Florida. If you have the money to fully cover damages associated with an accident, you might consider self-insuring. 
  • Uninsurable drivers. If you possess the financial reserves required by the state but are unable to obtain traditional insurance, self-insurance may be your only option to drive legally. 
self insured driver car sideswiped in an accident

How much does it cost to self-insure? 

To obtain a self-insurance certificate, you must prove that you have cash reserves equal to the amount of liability the state requires you to carry in insurance. While the FLHSMV does not require a deposit, and you may no longer have monthly premiums, you will still be paying for liability coverage. 

Required documents to apply include all of the following:

  • A notarized financial statement, or statement of net worth, that shows assets worth at least $40,000 (the combined limits of the minimum BI, PDL, and PIP). When selecting the assets to list on your balance sheet, you should not include your residence because it will be taken if you cannot pay your claim. 
  • The social security and license number for all drivers who will be holding the self-insurance certificate . 
  • A list of all the vehicles covered, including their make, model, year, VIN, and license plate numbers.

Contact a Tampa Bay Car Accident Lawyer

Have you been in a car accident? Are you wondering how financial liability applies if you are a self-insured driver?

If you have questions regarding full liability coverage or your legal rights as a self-insured driver in Florida, the experienced Tampa Bay car accident attorneys at The Fran Haasch Law Group can help. Our legal team will fight to recover the compensation that you deserve. 

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