Alternatives To Auto Insurance

Nearly every state requires drivers to carry some proof of financial responsibility in order to register and legally operate motor vehicles.

The most common form of financial responsibility is a liability auto insurance policy; however some states offer auto insurance alternatives. Depending on your state, these alternatives may come in the form of:

• Self insurance

• Surety bonds

• Cash deposits

 

Self Insurance As Proof of Financial Responsibility

In order to be self insured, you must set aside a certain amount of money for the purpose of covering unforeseen expenses, such as those accrued in an auto accident.

In states that accept self insurance―such as California, where you must obtain an official DMV-issued self insurance certificate―the amount you set aside must meet the minimum liability insurance requirements in that state.

Note, however, that in some states―such as Colorado― self insurance is only available to owners of 25 vehicles or more. Contact your state DMV directly for more information regarding self insurance options.

 

Surety Bonds Versus Cash Deposits

If you are not eligible for self insurance, your state might allow you to make a cash deposit for the entire amount of liability coverage required. For example, in the state of Washington, you must submit $60,000 to the WA DMV in a single submission. In the state of California, you must submit $35,000.

On the other hand, you might be able to purchase a surety bond by placing a small percentage of the bond amount down, as opposed to paying the entire amount at once. For this reason, surety bonds are the more popular alternative to traditional cash deposits.

 

Surety Bonds for Large Businesses

If your state doesn't allow you to substitute a surety bond for your personal auto insurance policy, it might allow you to purchase a surety bond for your commercial business. For example, if you own a business with a fleet of vehicles―26 vehicles or more―you might qualify for a surety bond in your state.

Contact your state DMV for detailed information regarding surety bonds for fleet owners.

 

Surety Bonds Versus Car Insurance

In most cases, a surety bond is no less expensive than purchasing a traditional liability insurance policy. Depending on the percentage your bond provider requires you to put down, it might even be more costly than traditional car insurance.

Therefore, the more advisable option is to shop around for a competitive liability insurance rate. You can compare auto insurance rates online, or by contacting the Insurance Department in your state.