Bonded Licenses VS. Insurance

Recently I have had several situations where I have spoken to people who were personal friends and family members of mine whom had very valid insurance questions regarding Bonds in lieu of an insurance policy.

I hear it all the time, usually from older gentleman who own a whole fleet of vehicles that they often switch off driving, that “I just have a bonded license so that I can drive anything I want and be covered. It’s so much more affordable for a bond than to insure all those vehicles.”

However, a bond is not the same as insurance!

A surety bond or surety is a promise by a surety or guarantor to pay one party (the obligee) a certain amount if a second party (the principal) fails to meet some obligation, such as fulfilling the terms of a contract.

A surety bond is a contract between three parties—the principal (you), the surety (the company) and the obligee (the entity requiring the bond)—in which the surety financially guarantees to an obligee that the principal will act in accordance with the terms established by the bond.

In other words, You pay for a bond, you pick the amount of coverage you would like, in the State of Ohio the minimum amount of coverage is 25,000 per person and 50,000 per accident. If you have an at fault accident your bond will pay out the amount of damages up to the limits of your policy. Then it is your responsibility to pay the bond company back.

There are also SR22 bonds, these bonds are usually tied to an insurance policy and are an agreement between your company and the state that if for some reason you let your insurance policy lapse or cancel they will alert the proper agency that you have done so which usually results in you loosing your driving privileges. You usually only need an SR22 bond if you have excessive points on your license or if your license has been revoked due to an DUI/DWI.

Auto insurance is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy. Auto insurance provides property, liability and medical coverage: Property coverage pays for damage to or theft of your car.

A bond doesn’t cover a vehicle and due to the laws in Ohio that any tagged vehicle must have active insurance, if you own a tagged vehicle but only have a bond and not insurance then you are at risk of losing your license due to not being in compliance with this Ohio law.

If you have any questions feel free to give me a call I am more than happy to help explain the difference to you and help you get the coverage you need to keep you legal.



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