Hello! I'm Dan Lyles with Lyles Insurance. And in this video we're going to go over the basics of an Ohio Financial Responsibility Bond.
We're going to go over what this bond is, and what it covers, and what it doesn't cover. We're also going to go over the similarities and differences between a financial responsibility bond and a regular auto insurance policy. But first, let me just go over something real quick about how a financial responsibility bond is also known as an “SR22 bond”. This is common terminology that you hear every day. Just keep in mind it's a little bit misleading, because a bond can come with or without an SR22 filing attached to it. I'll get into that more later about it, actually what this bond does. But I just wanted to let you know that this is a little misleading to call it an “SR22 bond.
A financial responsibility bond is a special type of coverage similar to an auto insurance policy, except for three major things. It only insures a single driver. It never puts any coverage on any vehicle. And it only provides state minimum liability coverage to the insured driver. Ohio is the only state that has these type of bonds. Other states do have what's called a financial responsibility bond, but they are completely different from what this is here. You only find this in the state of Ohio. This bond is intended for drivers who do not own a vehicle, but they need to carry at least state minimum liability auto insurance coverage for whatever reason. Usually that reason is to attach an SR22 filing to either keep their driver’s license valid, or to reinstate a suspended license.
The financial responsibility bond is the absolute bare minimum coverage you can have and still drive legally in the state of Ohio. It is intended as secondary coverage, meaning if you borrow someone's car and get into an accident, the owner’s regular auto insurance policy is going to be the primary insurer. And they have to pay the damages. Secondary coverage only kicks in if needed. If there was no primary insurance, or if the primary insurance paid out to its maximum limits, and there's none left. That's the only time secondary coverage kicks in. And also unlike regular auto insurance, the financial responsibility bond never uses credit as a rating factor. 92% of all auto insurance companies use credit at least to some degree. But they do not use credit on a financial responsibility bond.
Let me quickly explain how an SR22 filing works. It is something that the Ohio BMV requires some drivers to keep active in order to keep their license valid. It can be attached easily to either a regular auto insurance policy or a financial responsibility bond. You will find that there are a lot of auto insurance companies who will not write SR22 filings. You'll find other auto insurance companies who will write SR22’s, but they charge you a fortune for it. But believe me there are companies that go easy on SR22 filings. An SR22, the best way to think of it, is as a “tattletale”. In other words, if you have a policy that has an SR22 attached, if you ever cancel, lapse or expire on that policy, the insurance company is required by law to tattle on you to the Ohio BMV. And once that happens, your license gets suspended again until you have another active SR22 filing.
Let me quickly go over the coverage that a financial responsibility bond pays out in case you were to cause an accident. Since only liability coverage is offered with this bond, it only pays the other guy when you cause an accident. And it only pays the state minimum liability coverage, which in Ohio is 25/50/25. And to break that down and explain how that works, if you cause an accident and injure someone, $25,000 is the maximum this bond will pay any one person for their injuries. And if you injured multiple people, $50,000 is the most it would pay in total for everyone. And it also pays up to $25,000 in property damage.
It's important that you understand what a financial responsibility bond doesn't cover, or offer as coverage. First of all, this bond covers no other drivers besides the person named on the bond. And unlike regular auto insurance, a bond does not offer uninsured motorist coverage, medical payments coverage, or comprehensive and collision coverage. (which together is known as physical damage coverage, or “full coverage” on the vehicle you're driving). This is very important to keep in mind. Also, you're not covered on a motorcycle. And just like a regular auto insurance policy, no personal auto policy covers you at all using your vehicle for business and/or commercial use.
I quickly want to go over a common problem that I see happening regarding people who own vehicles. And instead of having regular auto insurance, just carry a financial responsibility bond instead. Remember that these bonds are only intended as secondary coverage. Whereas regular auto insurance is primary coverage. If you own a vehicle or have a vehicle registered in your name, you really need regular auto insurance instead of a bond.
And one last thing to go over before we close out here. This is an option that applies to drivers who need regular auto insurance, and they also need an SR22 filing. What some people choose to do is have two separate policies, versus just having the SR22 attached to their auto insurance policy. Now, this is okay to do. And there's no problem with doing that. In fact sometimes I recommend it for a small percentage of people. But for about 80 to 90 percent of you, you're going to find it's much cheaper to just carry one policy, the regular auto insurance policy with the SR22 attached on to it, versus having to pay for two separate policies. So, I hope you've got a better understanding now of how financial responsibility bonds work. Thanks and have a great day!
Dan Lyles is an Independent Insurance Agent serving Ohio, Indiana, Michigan, Pennsylvania, Virginia and West Virginia..