Many people wonder whether there are any legitimate alternatives to car insurance. As you may know, you are required to carry insurance coverage to compensate drivers for damages that you cause. If you do not have insurance, you could end up with a suspended and/or revoked driver’s license. The police are starting to do more insurance checks on drivers that they pull over so that they keep the roads as safe as possible.
What are some car insurance alternatives?
So what can you do if you don’t want to purchase car insurance – are there any legitimate alternatives? The one alternative option that people in select states have is to purchase a “surety bond.” A surety bond is basically a contract between three different parties. One party is the recipient of an obligation, another holds up the contractual end of the agreement, and the “surety” which assures the first party that the party holding up the agreement follows through on their contract.
How do surety bonds work?
Although these bonds are not available as a replacement for auto insurance in every state, they will work in places like California and Washington State as an alternative. In order to obtain a surety bond, you need to show that you are financially responsible in order to be granted one of these bonds. In the state of California, you would be required to put down a $35,000 surety bond granted to the DMV (Department of Motor Vehicles).
Different qualification requirements for surety bonds based on your state
It is also important to realize that getting a surety bond sometimes may require that you own an entire fleet of vehicles (i.e. fleet car insurance). In Washington State, it is required that you own at least 26 different vehicles in order to qualify. And the bond must be for the designated amount of money that the DMV requires. Assuming that you lived in Washington State, you would need to get your bond for a minimum of $60,000 to cover all of your vehicles. The bond would need to be obtained through a licensed bond company.
Why not just make a cash deposit with the DMV?
Theoretically, you may be able to make a cash deposit with your DMV (if you live in the right state) instead of getting a bond and/or insurance. The reason that it is more common to get a bond though is because they are not required to make a full payment to their DMV. Having to pay $60,000 up front is probably not a good investment for most people. The majority of people would rather pay for a monthly insurance policy. However, a surety bond allows the individual to only pay a fraction of the large sum of money to the bond company over a period of time.
Is it better to buy car insurance or a surety bond?
If getting a surety bond was the best way to keep your vehicles insured and protected, there would be a lot more people getting them. The reason that they aren’t very common is due to the fact that they don’t provide as extensive of coverage as you would get with car insurance protection. You really put down a lump sum of money for the bond and hope that damages you cause in the event of an accident do not exceed the amount that you put towards your bond. If they do exceed the amount, you are responsible for paying out of pocket.
I would personally not recommend going the route of the surety bond as an alternative to insurance. You certainly can if it is legal in your state, but you may not end up with enough financial support in the event of an accident. I would instead recommending comparing quotes from the leading providers in your area. You can compare quotes easily by scrolling to the top of the page and entering your zip code. It is completely free and could help you save a lot of money on an insurance policy.