Proving that you have sufficient funds to pay for damages without relying on traditional auto insurance typically involves meeting your state’s requirements for financial responsibility.
In many states, this can be done with a surety bond, making a cash deposit with the state’s Department of Motor Vehicles, or getting a certificate of self-insurance. These alternatives to standard auto insurance are designed to ensure that you can cover bodily injury and property damage costs up to the state’s required minimums if you are at fault in an accident.
What is a surety bond, and how does it work?
A surety bond is a legally binding agreement involving three parties: the principal (you, as the driver), the surety (usually a surety company) and the obligee (the state or authority requiring financial responsibility). Instead of paying insurance premiums, you pay a fee for the bond. If you cause an accident and are found responsible for damages, the surety company initially pays the injured party.
The surety bond guarantees funds are available to cover losses if a driver cannot pay out of pocket. The specific requirements—such as the required bond amount—vary depending on state regulations.
Do all states allow these alternatives to auto insurance?
Not all states recognize surety bonds, cash deposits or self-insurance as acceptable substitutes for traditional auto insurance. Each state maintains its own financial responsibility laws, and while many do permit alternatives, they may impose strict criteria or significant minimum bond/deposit amounts.
Contact your state’s Department of Motor Vehicles to find out if you can use a surety bond or other methods in place of auto insurance.
States that allow drivers to deposit funds or post a bond instead of car insurance
Below are the states that allow drivers to provide a cash deposit or post a bond to fulfil auto insurance requirements.
| State | Source |
|---|---|
| Alabama | https://www.revenue.alabama.gov/faqs/how-do-i-apply-for-a-surety-bond/ |
| Arizona | https://www.azleg.gov/ars/28/04007.htm |
| California | https://www.insurance.ca.gov/flipbook/Automobile-Insurance/12/ |
| Colorado | https://dmv.colorado.gov/sites/dmv/files/DR2316.pdf |
| Delaware | If you have 15 vehicles registered in your name |
| Idaho | https://www.fellerwendt.com/blog/idaho-car-insurance-laws-requirements/ |
| Indiana | https://www.in.gov/bmv/licenses-permits-ids/suspension-and-reinstatement/proof-of-financial-responsibility/ |
| Iowa | https://www.nolo.com/legal-encyclopedia/iowa-car-insurance-laws.html |
| Louisiana | https://casetext.com/regulation/louisiana-administrative-code/title-37-insurance/part-vii-motor-vehicles/chapter-1-insurance/subchapter-a-self-insurance/section-vii-101-certificates-of-self-insurance |
| Maine | https://www.mainelegislature.org/legis/statutes/29-A/title29-Asec1605.html |
| Maryland | https://www.bondability.com/MD-bonds/Maryland-Auto-Insurance-Fund-Producer-Bond |
| Massachusetts | https://www.mass.gov/info-details/massachusetts-law-about-auto-insurance |
| Mississippi | https://law.justia.com/codes/mississippi/title-63/chapter-15/section-63-15-49/ |
| Missouri | https://dor.mo.gov/driver-license/insurance/company-self-insurance.html |
| Montana | https://archive.legmt.gov/bills/MCA/title_0610/chapter_0060/part_0010/section_0370/0610-0060-0010-0370.html |
| Nebraska | https://dmv.nebraska.gov/dvr/ins-req |
| New Mexico | https://www.mvd.newmexico.gov/chapter-11-mandatory-insurance/ |
| New York | https://www.dfs.ny.gov/insurance/ogco2002/rg021009.htm |
| North Carolina | https://www.ncleg.gov/EnactedLegislation/Statutes/PDF/BySection/Chapter_20/GS_20-309.pdf |
| Ohio | https://insurance.ohio.gov/wps/wcm/connect/gov/de39225a-e52f-4cbd-90e6-4179bc7e0b86/financial_responsibility_bonds_2021.pdf |
| Oklahoma | https://www.oid.ok.gov/wp-content/uploads/2020/01/2020_Auto-Brochure.pdf |
| Rhode Island | https://webserver.rilegislature.gov/PublicLaws/Law14/law14029.htm |
| South Carolina | https://www.scdmvonline.com/Business-Customers/Dealers/Dealer-Licenses/Surety-Bond |
| South Dakota | https://sdlegislature.gov/Statutes/32-35 |
| Tennessee | https://revenue.support.tn.gov/hc/en-us/articles/360060121912-VT-12-The-Surety-Bond-Process |
| Texas | https://www.tdi.texas.gov/commercial/pcbond.html |
| Utah | https://bci.utah.gov/private-investigator-licensing/surety-bond-and-liability-insurance-information/ |
| Vermont | https://dmv.vermont.gov/sites/dmv/files/documents/VI-107-Application_for_Self_Insurance.pdf |
| Virginia | https://www.dmv.virginia.gov/sites/default/files/forms/fr302.pdf |
| Washington | https://dol.wa.gov/driver-licenses-and-permits/mandatory-insurance |
| Wisconsin | https://oci.wi.gov/Documents/Consumers/PI-057.pdf |
| Wyoming | https://www.dot.state.wy.us/files/live/sites/wydot/files/shared/Compliance_and_Investigation/Rules%20&%20Regs%20-%20Insurance%20CH%203.pdf |
Final thoughts
Choosing to prove financial responsibility without a traditional auto insurance policy can give you more flexibility, but it also comes with some risks. While you might save money on monthly premiums, putting up a large amount of money or buying a surety bond often means paying a big amount upfront. It’s essential to keep up with your state’s laws, keep all your paperwork in order and ensure you have enough money or a bond to cover any accidents.
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