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Opting-out of auto "No-Fault" insurance -- legally?
Old 03-19-2015, 05:47 PM   #1
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Opting-out of auto "No-Fault" insurance -- legally?

My state has a requirement to maintain "No-Fault" auto insurance for any vehicle when operated on the roadways. I believe many other states also have this model.

The specify law makes reference to requiring an insurance policy or "other security" for this purpose. This sounds a lot like the door to self-insurance may be available but not widely promoted.

Has anyone looked into the possibility of legally "self-insuring" in an auto No-Fault state?

Thanks in advance

-gauss
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Old 03-19-2015, 07:00 PM   #2
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'Self insuring' is allowed in some states, ie FL. But you may have to secure a bond, or in FL provide a pretty extensive statement of net worth and bank/asset accounts with info you might not want to share with the DMV. Few people probably do this as its just easier to buy a policy from an insurance co. Official Website Florida Department of Highway Safety and Motor Vehicles
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Old 03-19-2015, 07:04 PM   #3
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Do I understand this correctly...you're looking for ways to put your entire net worth at risk just so you don't have to pay for car insurance?
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Old 03-19-2015, 07:12 PM   #4
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Thank you for your concern, soupcxan

My state has one of the highest auto insurance rates in the country, and I already maintain medical insurance. I maintain several vehicles.

I like to think outside the box. It has served me quite well in getting to this point in my life.

Assets in ERISA retirement accounts would be noncollectable. Pensions would be noncollectable.
Social Security would be noncollectable. IRAs in many states would be noncollectable.

There would be no wage garnishment available if I choose to remain outside the paid employment sphere.

I am currently paying $20/month for legal insurance. I would need to determined if this would be covered to defend against any threats to after-tax assets.

-gauss

p.s. Oh yes, I am a Berkshire Hathaway investor -- good to be on the sell side of the insurance game.
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Old 03-19-2015, 07:14 PM   #5
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In addition to financial "coverage", insurance also buys lawyers and legal acumen. Whether a big accident involving extensive injuries and many insured parties or just a "small" accident in which a car is totalled, it's nice to have the lawyers from your own insurance company providing the defense.
I would think an individual with high net worth but no insurance would be seen as a very nice plum to be picked by someone out trolling for a big settlement check. "A lawyer is gonna cost him a lot, and a loss will cost him even more. Cha-ching!"

Re: legal insurance. How are those lawyers incentivized? I like the situation where those employing the lawyers will lose a lot of money if the lawyer does poorly in court/negotiations. I don't want "My Cousin Vinny".
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Old 03-19-2015, 07:20 PM   #6
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Thanks Greydog!

That is exactly the type of information that I was looking to review. I just need to float that around in my state to see if we have developed similar regulations to allow this.

-gauss
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Old 03-19-2015, 07:22 PM   #7
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Samclem,
Good counter-issues. Thanks

gauss

"Cousin Vinny" was a great movie -- would not want to live it in real life, however
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Old 03-19-2015, 07:25 PM   #8
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Isn't one of the tenants of no-fault law that you are not allowed to file lawsuites except under very narrow conditions?

Maybe I would maintain the insurance on the car that is driven the majority of the time but remove it on the other two. This would cut insurance cost down by ~2/3 without the same increase in risk.

Also, my state penalty for being caught driving without no-fault is $500 misdemeanor or 1 year in prison. If I can file paperwork to avoid the risk of the "1 year in prison" outcome then this would also be potentially useful - regardless of if I happen to insurance at the moment or not.

-gauss
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Old 03-19-2015, 07:31 PM   #9
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Note that only 3 states having no fault laws allow opting out of Personal Injury Protection, Ky, Nj and Pa. For the liability side I understand that in many states you can deposit the amount of minimum coverage with the state to waive the insurance coverage (Check proof of financial responsibility)
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Old 03-19-2015, 07:34 PM   #10
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As an aside if you don't live in a no fault state, and no longer rely on earned income you can go back to medical payments coverage, eliminating the disablity part. My agent suggested this to me after I retired. It is sort of like not needing regular disability coverage after retirement.
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Old 03-19-2015, 07:35 PM   #11
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Originally Posted by soupcxan View Post
Do I understand this correctly...you're looking for ways to put your entire net worth at risk just so you don't have to pay for car insurance?
Aren't we all putting our entire net worths at risk even with auto insurance? I think mine is $100k or $150k with anything above that being my responsibility. It's just a matter of who pays the first $100k or whatever. With insurance, it's the ins. co. Without insurance, it's us.

I wouldn't mind putting $100k at risk if our insurance was significantly more than it already is (presumably the OP's situation). Especially if we don't drive a lot.
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Old 03-19-2015, 07:55 PM   #12
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Aren't we all putting our entire net worths at risk even with auto insurance? I think mine is $100k or $150k with anything above that being my responsibility. It's just a matter of who pays the first $100k or whatever. With insurance, it's the ins. co. Without insurance, it's us.
If you have substantial assets that would be appealing to a plantiff then I think you are underinsured. My auto policy limit is several times higher than yours and a I have an umbrella policy on top of that. Yes, it is a low probability event that you would be accused of causing a severe accident (or someone claims to be injured on your property), but it could be catastrophic if it hits you. Even just the cost to defend yourself if you are ultimately not legally responsible could run into the six figures.

My umbrella policy is $180/year and I sleep better knowing the insurance co is first in line to defend their million (and then, mine).
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Old 03-19-2015, 08:23 PM   #13
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Originally Posted by soupcxan View Post
If you have substantial assets that would be appealing to a plantiff then I think you are underinsured. My auto policy limit is several times higher than yours and a I have an umbrella policy on top of that. Yes, it is a low probability event that you would be accused of causing a severe accident (or someone claims to be injured on your property), but it could be catastrophic if it hits you. Even just the cost to defend yourself if you are ultimately not legally responsible could run into the six figures.

My umbrella policy is $180/year and I sleep better knowing the insurance co is first in line to defend their million (and then, mine).

I also carry higher car insurance liability limits, $250K per occurrence, $500K total, with a 1 million dollar personal umbrella policy. Some here would say I am also underinsured.
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Old 03-19-2015, 08:44 PM   #14
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Originally Posted by soupcxan View Post
If you have substantial assets that would be appealing to a plantiff then I think you are underinsured. My auto policy limit is several times higher than yours and a I have an umbrella policy on top of that. Yes, it is a low probability event that you would be accused of causing a severe accident (or someone claims to be injured on your property), but it could be catastrophic if it hits you. Even just the cost to defend yourself if you are ultimately not legally responsible could run into the six figures.

My umbrella policy is $180/year and I sleep better knowing the insurance co is first in line to defend their million (and then, mine).
Most of our assets are judgment proof (retirement accounts). We don't drive a lot but get very little discount for it on premiums. There's always a chance we'll hit a neonatal brain surgeon and chop off a pair of million dollar hands. An umbrella policy for us was much more expensive so we passed many hundreds IIRC).

We do carry closer to half a million liability on the house since I figure we're fairly average with respect to risk profile there, and could have a hungry plaintiff seeking a fall on our property. And we have an attractive nuisance on the other side of our property that could entice kids to climb into our yard and injure themselves.

For the purposes of the thread and satisfying state minimum insurance requirements, I figure the state minimums (what you'd have to put up for a surety bond or other security) wouldn't matter much in terms of a hit on your net worth. If I lost $50k it wouldn't be the end of my FIRE plans (if I'm saving $1000/yr in the meantime).

I guess we're all comfortable accepting the fact that insurance companies make money on average by collecting premiums. The only thing an insurance company gets that you might not is bulk rates at an insurance defense law firm (or at least they are better at consuming legal services and reviewing bills for excessive charges).
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Old 03-19-2015, 11:08 PM   #15
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Most of our assets are judgment proof (retirement accounts). We don't drive a lot but get very little discount for it on premiums. There's always a chance we'll hit a neonatal brain surgeon and chop off a pair of million dollar hands. An umbrella policy for us was much more expensive so we passed many hundreds IIRC).

We do carry closer to half a million liability on the house since I figure we're fairly average with respect to risk profile there, and could have a hungry plaintiff seeking a fall on our property. And we have an attractive nuisance on the other side of our property that could entice kids to climb into our yard and injure themselves.

For the purposes of the thread and satisfying state minimum insurance requirements, I figure the state minimums (what you'd have to put up for a surety bond or other security) wouldn't matter much in terms of a hit on your net worth. If I lost $50k it wouldn't be the end of my FIRE plans (if I'm saving $1000/yr in the meantime).

I guess we're all comfortable accepting the fact that insurance companies make money on average by collecting premiums. The only thing an insurance company gets that you might not is bulk rates at an insurance defense law firm (or at least they are better at consuming legal services and reviewing bills for excessive charges).
Try Geigco, I just bought a new vehicle and my ins is ~$350/yr with pretty high limits.

Also, Umbrella insurance covers extra liability for the car AND home.
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Old 03-20-2015, 04:34 PM   #16
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I don't know of any individuals that post financial responsibility rather than insure, but I do know of some businesses that do. One had a fleet of around 100 autos and after a couple years went back to insuring them, too much head ache dealing with claims and other insurance companies, the savings was about a wash. I know another large fleet that self insures but they still hire a large insurance company to administer everything for them.


I'm not against the idea if you can swing it financially, you may want to check with other states that you drive into to see if they accept your financial responsibility.


It wouldn't be for me, I'm a firefighter/emt and have testified as a witness at more than a couple trials involving auto accidents. Juries try mighty hard to compensate victims and I wouldn't trust them to recognize any law protecting a large amount of retirement assets.
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Old 03-20-2015, 04:53 PM   #17
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I don't know of any individuals that post financial responsibility rather than insure, but I do know of some businesses that do. One had a fleet of around 100 autos and after a couple years went back to insuring them, too much head ache dealing with claims and other insurance companies, the savings was about a wash. I know another large fleet that self insures but they still hire a large insurance company to administer everything for them.


I'm not against the idea if you can swing it financially, you may want to check with other states that you drive into to see if they accept your financial responsibility.


It wouldn't be for me, I'm a firefighter/emt and have testified as a witness at more than a couple trials involving auto accidents. Juries try mighty hard to compensate victims and I wouldn't trust them to recognize any law protecting a large amount of retirement assets.

Actually what you would do is after the judgement file for Bankruptcy protection. By law 401ks are protected, as in some states at least is your primary residence. This is enforced by bankruptcy court not regular courts and juries are not involved.
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Old 03-20-2015, 05:44 PM   #18
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Try Geigco, I just bought a new vehicle and my ins is ~$350/yr with pretty high limits.

Also, Umbrella insurance covers extra liability for the car AND home.
That's about what we pay already (x2 since there's 2 of us). But we would have to increase the auto liability limits (and pay more premiums) before they would issue us an umbrella. I'll have to double check current costs when I shop the policy this summer at the next renewal, since maybe we're older and actuarially less risky now.

I'm only protecting a few hundred thousand (at a maximum) and some of that would be spent down during litigation that might stretch for years (if it's a complex case). And I'd be spending plenty on attorneys to protect that few hundred thousand, which would come out of any amounts recoverable by the plaintiff. In the end, it might come down to bankruptcy but the majority of my retirement assets would be protected.
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Old 03-30-2015, 05:49 PM   #19
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Last year my daughter had a minor accident, but her and the other vehicle occupant still made the ambulance ride to the emergency room, later released as all “ok” … The trip and time in the emergency room amounted to around $20,000 for each. The other side was “at fault”. I’d hate to be them, with $40,000+ of medical expenses, and paying it out of some asset account, vs insurance.

$40,000 divided by $20 per month… It would take 2,000 months (166 years) of insurance payment “savings” to recoupe the cost of one minor accident.
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Old 03-30-2015, 05:57 PM   #20
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Nothing i would ever want to do , self insure.
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