In nearly every conceivable scenario, if you’re driving around in a motor vehicle, there is no reason why you should not have some level of insurance coverage. It’s the law, for one thing. And it’s just good financial sense, for another.
The vast majority of the 250 million drivers in the U.S. are legally required to carry their state’s minimum liability coverage. (Liability coverage protects the other driver in the event of a crash you cause, including any property damage or injuries they sustain.)
Are there exceptions to this rule? Well, sort of.
What is self-insurance?
The concept of “self-insurance” essentially describes a situation in which a person chooses not to take out a policy with a third-party insurance company, but rather assumes the financial risk they pose as a driver themselves.
New Hampshire is the only state in which this concept of “self-insurance” is a legal alternative to purchasing minimum limits of liability coverage. There, you must be able to prove you are financially responsible enough to pay any damages if you’re found at-fault in an accident.
Another example of “self-insurance” would be circumstances in which states grant exemptions to people who are religiously opposed to conventional insurance policies. Generally, a “religious exemption” would mirror New Hampshire’s statewide program and would still require a person to prove they are financially able to pay for claims when they are at fault. But are these exemptions legitimate, and are they actually practiced? Let’s explore further.
How does self-insurance for religious purposes work?
Some states allow religious people to use self-insurance if they can provide proof that their religious beliefs contrast with the idea of insurance, which is essentially the pooling of risk among a group of people.
In these scenarios, someone will need to provide financial proof, which varies according to state-specific DMV rules but may consist of purchasing a surety bond or putting a deposit down with your DMV. The amount of this bond must either meet or exceed the state’s liability limits.
When a religious exemption for car insurance backfires
In May 2017, KMOV News 4 in Jefferson City, Missouri covered the story of a local man named Don Meier who had been awarded nearly $4 million in damages after he had been injured in an auto accident in 2009.
The at-fault driver initially caused $489,000 in bodily injury damages to Meier. However, because the at-fault did not have conventional insurance, Meier has yet to see a penny of the damages and his medical bills have continued to pile up in the near-decade since.
In most cases, if the at-fault driver had had the liability insurance legally mandated by the state of Missouri, Meier’s medical bills would have been paid by the at-fault driver’s insurance company up to his liability limits. Any remaining bills would have to be paid by the at-fault driver himself.
In this case, though, the “self-insured” driver belonged to the Mint Hill Mennonite Church, which offers a certificate to members stating they can be self-insured but must carry the state’s mandatory minimum coverage limits of $50,000.
According to KMOV, in paperwork filed with the Missouri Department of Revenue in 1989, members of the church stated the following:
“We as a church body at Mint Hill Mennonite Fellowship Church do hereby wish to state that according to religious beliefs, prohibit the purchase of insurance that does not consist of a brotherhood type aid plan. We do believe that as Christians we are responsible to care for those of our church. This we desire to do for conscience sake in so far as the laws of the state of Missouri grants us these privileges.”
Not all church members consider this enough coverage – including the pastor – so they opt for their own individual plans with conventional insurance companies.
What’s the takeaway here? Despite the church’s certificate plan, it couldn’t pay for the damages caused to Don Meier – and, of course, neither could the at-fault driver. And without the financial support of an actual insurance company, that driver ultimately filed for bankruptcy for the full amount of the damages. And as of May 2017, Meier has still yet to receive money from any party.
So, are there actual religious exemptions for car insurance?
Legally and technically, yes.
But financially and realistically, no.
Some states offer forms of religious exemption to auto insurance. From the Council of State Governments:
- In Illinois, a religious organization and its members are exempt if they can provide “a bona fide conviction that the acquisition of insurance is contrary to their religious beliefs.” They must then: 1) provide evidence of paying damages for which they were liable, and 2) file an irrevocable letter of credit with the state.
- Georgia provides a certificate of self-insurance to religious groups which prove they can “provide coverages, benefits, and claims-handling procedures substantially equivalent to those afforded by a policy of vehicle insurance.” Religious groups must file a “minimum security” with the state to get this certificate; the exact amount depends on the number of vehicles being insured.
- Other states allow individuals to post collateral in lieu of purchasing insurance. In Ohio, residents can deposit $30,000 in cash or government bonds with the state treasurer to bypass the insurance mandate.
In summary, while the term “exemption” is thrown around quite a bit, you are only exempt from procuring insurance coverage in a certain way – i.e., working with a big national carrier. You are still legally required to pay for any damages you cause in an at-fault accident.
In Don Meier’s case, the state of Missouri did allow the at-fault driver to self-insure through his church. Why the state did not require the church to pay the minimum $50,000 damages is still unclear.
My recommendation as a licensed insurance agent? It’s better to have high liability limits with a reputable insurance company than take a chance with self-insurance.