Car Insurance Alternatives

In some states, people looking for car insurance alternatives can buy a surety bond as a way to insure themselves. Almost all 50 states require insurance coverage, so make sure your car insurance alternative is a legal option.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jun 12, 2020

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Here's what you need to know...

  • The main reason behind buying car insurance is for financial protection
  • A surety bond is a way for a person to insure themselves
  • Each state will set its own requirements for this form of financial protection

Most people buy car insurance to satisfy their state’s financial responsibility laws, but there is another alternative available to vehicle owners in some states. It’s a costly option, but it does exist. Can you have a bond instead? Drivers can choose to buy a surety bond.

Is an auto insurance alternative right for you?

Read on to learn about what is required for buying alternative car insurance, and if it is even an available option for you in your state.

Enter your zip code above in our free insurance comparison tool above.

Financial Responsibility for Damages

The main reason behind buying car insurance is for financial protection. If a person is deemed responsible for another’s personal injuries, including funeral expenses in the case of a fatal accident or damage to another driver’s car or personal property, they must pay compensation.

People who don’t have insurance or an alternative means to pay are personally responsible for these costs.

Very few people have the means to pay for a significant claim or even a claim for damages of any amount. Without some form of financial protection, they will be faced with having to consider using any savings they have or cashing in assets to satisfy the claim.

The alternatives to doing so are a good investment against disaster, even if the driver is never involved in an accident.

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Surety Bonds for Drivers

Can you self insure for auto insurance? A surety bond is a way for a person to insure themselves, as opposed to buying a policy from an insurance company. This option, which is not available in all states, involves buying a bond in the same amount as the minimum level of coverage mandated by the state.

The driver also has the option of paying a cash deposit of the same amount to the Department of Motor Vehicles (DMV), but buying a surety bond is probably a better choice. The bond is purchased from a bond company that is licensed to do business in a particular state.

Instead of paying the company the face amount of the bond, the buyer is only required to put up a certain percentage of that amount.

Before making the decision to buy a surety bond, the driver should do his or her homework to make sure that this option is available in his or her state.

Once this has been confirmed, the driver should look at a number of surety bond companies to find a reputable one. It’s important to choose a well-established company that has been in business for some time.

When the driver has found a surety bond company that he or she wants to deal with, he or she should contact a representative to make arrangements to fill out the necessary paperwork and pay the amount required to set up the bond.

The driver will need to carry proof of financial responsibility in the vehicle since this information will be needed if he or she is stopped by police or involved in an accident.

Surety Bond for Fleet Owners

What are the disadvantages of self-insurance? In some states, the surety bond option is not available to individual drivers. They are required to either pay a deposit to the DMV or buy a car insurance policy. A company that owns a fleet of vehicles can take advantage of this self-insurance option, though.

Each state will set its own requirements for this form of financial protection. In Washington State, for example, a person or company must own at least 26 vehicles to qualify for a surety bond, and the minimum amount that must be purchased is $60,000.

The appropriate DMV will be able to provide details to interested parties.

Each consumer needs to consider whether they would be better off buying a bond instead of car insurance. Buying an is the most popular choice, and it is easy and convenient to do so.

An individual may consider buying a surety bond if they are not able to arrange insurance or the rates they are being quoted for premiums are too high. Companies operating a fleet of vehicles will also want to consider their options carefully.

Buying a surety bond may be a more economical choice than paying for insurance for all the vehicles that it owns.

Before making a final decision, an individual or business owner should do their homework.

Not only do they need to meet the financial responsibility requirements set by the state, but they must also make sure that they have enough protection in place to make sure they will not be faced with having to liquidate their hard-earned assets to pay a claim for damages.

Once they have educated themselves about their options, they can decide whether taking out a standard car insurance policy is the right choice for them or if they should be considering an alternative to car insurance instead.

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