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How To Self Insure Your Vehicle?

Paying monthly auto insurance premiums is the norm but it is not the only way to insure your vehicle. Most of us purchase car insurance from an insurance company, dealing with the extra hit to our bank accounts each month. Surprisingly, this is not the only option. Many states allow drivers to self insure a car. Self-insurance comes in many forms. Generally, you’ll either have to purchase a surety bond or make a deposit with the Department of Motor Vehicles. In a nutshell, you set aside money for your insurance needs, but that amount must coincide with minimum insurance requirements in your state. Wondering how to self insure your car? Keep reading for the answers.

What Does It Mean To Self Insure A Car?

Many confuse self-insuring a car with being uninsured. In reality, self-insured car insurance is simply an alternative to traditional auto insurance policies. When you decide to self insure your car, you are essentially providing your own insurance. Rather than purchasing a policy from Progressive or Allstate, you are responsible for any costs that the insurance company would typically pay. 

When you make the resolution to self insure, you are tasked with setting aside the necessary funds to pay for any accidents or bills on your own. You do not have an insurance policy that would cover the costs that normally would be covered. Everything is paid out of your own pocket. If you are in an auto accident, you pay for car repairs and any medical bills incurred. If you are at fault in a car accident and are sued by another party, you are encumbered with paying legal fees and settlement costs. 

Choosing to self-insure can be a way to save money by not paying monthly premium costs. However, for those with limited budgets or zero savings, self-insuring is a risky bet that might not pan out long term.

How To Self Insure A Car?

Much like there are different auto insurance policies there are several different types of self-insured auto insurance. The right path for you depends on your overall budget and lifestyle. Not every self-insurance strategy will work for every budget. 

Make A Money Deposit

Self-insurance can make sense for individuals who have a great deal of money or those who own several cars. If you’re someone who owns many cars, self-insurance would make more sense than having an individual policy on each vehicle. Most states allow self-insurance, but each holds distinct rules for what that entails. In most cases, you’ll need to deposit money with your state’s department of motor vehicles (DMV) to acquire a certificate of self-insurance. Without this certificate, you can be fined if pulled over for not possessing auto insurance. 

The amount of money you will need to deposit with the DMV varies greatly from state to state. Generally, you are expected to deposit between $10,000 and $60,000. The deposited money is stored away when your car is registered. It functions as a typical insurance policy does, coming into play in the event of an accident. 

Purchase A Surety Bond

Instead of a money deposit, some states will require you to purchase a surety bond. A surety bond forms a legal contract between all parties involved. A legal surety bond will need to be purchased from a licensed surety company. A surety bond is not the same as a money order or cashiers check. Your state guidelines will explain how much or how little you will need to pay for your bond. The bond proves that you have the means to cover liability in the event of an accident and is legally binding.

Is Self Insurance Right For Me?

For some folks, self-insurance is a way to save money on monthly premiums. Unfortunately, the high one-time payouts can make it inaccessible for individuals who do not have much in the way of savings. Foregoing a traditional policy saves money over time, but a big deposit or surety bond can be difficult for the average family or individual to produce. However, if you do have the funds available for the initial deposit or bond, own several vehicles, going the route of self-insurance might be right for you!