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A Guide to Car Insurance Alternatives

  • Auto Insurance
  • Sara Sam
  • 5 minutes

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What drives along with the thought of owning a car? Car insurance, of course. Since car insurance is mandatory in most states, we seldom consider any other possibility. But are there any alternatives to car insurance? If so, what are the possible car insurance alternatives? Here we discuss the available alternatives and the reasons for opting for the same  

All the states except New Hampshire and Virginia require car insurance. Therefore, one can waive their car insurance if their state permits it. However, this choice can expose you to high financial risks. Out-of-pocket expenses arising during at-fault accidents can burn a hole in your pocket if not for the right car insurance coverage.

However, if you cannot afford the high car insurance premiums car insurance alternatives will come to your rescue.

What is the financial responsibility law?

Financial responsibility laws require an individual or business to prove that they have the assets to cover damages that might occur during an accident. The laws, however, will vary within each state.  

Having a car insurance policy will serve as the proof of assets. This is a preferred option as it will help one comply easily with the financial laws of a state. In addition, the liability coverage most insurance companies offer can protect you from violating the financial responsibility laws of the state.

Read here: Getting Car Insurance without Address: Myth or Real?

What are the common car insurance alternatives?

These are the most common car insurance alternatives.

  • Surety Bond
  • Cash or Security
  • Self Insurance
  • Paying an uninsured motorist fee

Surety Bond

If you end up in a situation where you cannot find affordable auto insurance, then a surety bond can be opted for. Though the interest rates are lower, you might need to pay the amount upfront. However, unlike auto insurance premium rates, surety bonds depend not on the driver but on financial stability.  As a result, the amount paid doesn’t differ with the type of car you own.   

How does a surety bond work?

Once you opt for a surety bond, you must pay the amount you have chosen for your bond. In case of an accident, the bond will cover the expenses up to their value. The driver would have to pay back the amount if the expense was higher than the bond amount.   

However, the upfront payment of the surety bond is lower than the usual car insurance rates. This is a reason for its popularity.   

Is surety bond available in all states?

Several states allows the use of surety bonds instead of car insurance.

  • Alabama: $50,000
  • Arizona: $40,000
  • California: $35,000
  • Colorado: $35,000
  • Delaware: $40,000
  • Idaho: $50,000
  • Indiana: $40,000
  • Iowa: $55,000
  • Louisiana: $55,000
  • Maine: $127,000
  • Maryland: $75,000
  • Massachusetts: $10,000
  • Mississippi: $15,000
  • Missouri: $60,000
  • Montana: $55,000
  • Nebraska: $75,000
  • New Mexico: $60,000
  • New York: $25,000
  • North Carolina: $85,000
  • Ohio: $30,000
  • Oklahoma: $75,000
  • Rhode Island: $75,000
  • South Carolina: $35,000
  • South Dakota: $25,000
  • Tennessee: $60,000
  • Utah: $160,000
  • Vermont: $115,000
  • Virginia: $50,000
  • Washington: $60,000
  • Wisconsin: $60,000
  • Wyoming: $25,000

Self Insurance

Another insurance alternative to lower your premium rates is to self-insure your car. To self-insure your vehicle, you must either purchase a surety bond or leave a cash deposit with the Department of Motor Vehicles or the Department of Insurance in your state.   

However, opting for self-insurance requires proper planning of your finances. This is because you are opting out of an insurance policy and honing the financial responsibility yourself. In addition, one can also keep a higher deductible in place since monthly premium payments are excluded. 

Is self-insurance available in all states?

If you live in a state that allows self-insurance, then you’ll have to show your financial stability and procure a certificate of self-insurance to operate your car legally.

These are the states that allow you to self-insure your car.

  • Alaska
  • Georgia
  • Indiana
  • New Mexico
  • Pennsylvania
  • Connecticut
  • Hawaii
  • Maryland
  • North Dakota
  • Vermont

cheap car insurance alternatives

Uninsured Motorist Fee

The main purpose of uninsured motorist coverage is to pay for medical bills after an accident with a driver who doesn’t have insurance. An uninsured motorist fee is a way to pay for injuries from a car accident without having to pay co-insurance, copays, or health insurance deductibles.   

UIM is less expensive than liability coverage, but pricing vary by state. This is because some states have a higher number of uninsured drivers, which means you’re more likely to use UIM coverage.

Read Here: Five Common Car Insurance Mistakes to Avoid

Which are the states that allows uninsured motorist fee?

The state of Virginia, allows you to legally drive a car without insurance if you have paid the uninsured motorist fee of $500 per year. However, some states do not offer this coverage option.

Following are the states that require the uninsured motorist fee.

  • Connecticut
  • Washington DC
  • Illinois
  • Kansas
  • Kentucky
  • Maine
  • Massachusetts
  • Minnesotta
  • Missouri
  • Nebraska
  • New Hampshire
  • New Jersey
  • Newyork
  • North Carolina
  • North Dakota
  • Oregon
  • South Carolina
  • South Dakota
  • Vermont
  • Virginia
  • West Virginia
  • Wisconsin

Do we need car insurance alternatives?

Car insurance coverages are widely available to protect you from out-of-pocket expenses during unprecedented incidents. However, one has the choice to opt out of a mandatory requirement with different alternative options available. 

It is important to have your finances in check before you opt for car insurance alternatives. This is because alternatives like surety bond and self insurance is based on the financial stability of the owner and not the type of car or driving history.

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