To be able to drive on the Golden State, you need at least the basic coverage that is outlined in the California Financial Responsibility Law. With this law, the government of California wants to make sure that any driver that is involved on a car accident has enough coverage to cover the expenses generated to other people by the accident.
Since it’s the minimum car insurance required by law, every single car insurance company in California knows about it and can sell it to you. Most people who own a car and live in California (as opposed to traveling or passing through California) usually get better coverage to protect themselves from other eventualities, especially car theft.
However, getting basic insurance is not the only way to comply with the Californian Financial Responsibility Law. The law has other provisions that allow you to prove your financial responsibility in some other manner.
One of them is through surety bonds, which are in fact, another type of insurance. A driver might opt to get a surety bond for $35,000 dollars.
The surety bond can only be obtained from a company that has been authorized to do so by the government of California. You can find a list of these companies in the website of the Department of Insurance: www.insurance.ca.gov.
How does the surety bond work? Well, the company that sells the surety bond (the surety) acts as a guarantee for the driver (the obligee) towards an aggravated party (the principal) in case of an accident. If the driver fails to repair the damage caused, the aggravated party can recover his or her losses from the money that the bond covers.
So, let’s say that John Smith goes to the supermarket and bumps into Mark Steven’s car and it is determined that John Smith is at fault. The drivers agree that it’s a small accident with no consequences other than some minor repairs. John Smith then has to pay out of his pocket the minor repairs.
However, if the damages are substantial and expensive, and John Smith finds himself in a position where he can’t cover them, Mark Steven can recuperate his losses through the security bond.
In reality, however, unless you’re in a very special circumstance, it’s much better to get a normal, commercial auto insurance policy that doesn’t tie up so much money, especially since by getting better coverage for a few extra dollars, you won’t have to deal with attorney fees if you get sued.