What Is Self-insured Car Insurance?
Self-insured car insurance is a type of car insurance where the driver takes on the responsibility and financial burden for any damages caused in an accident. If you are in an accident and cause damage to someone else’s property, you have to pay for it. However, it is not as simple as deciding not to purchase an auto policy and paying cash for damages.
Each state has its own regulations regarding self-insured car insurance, so be sure to determine what they are within your state. If you don’t follow these regulations, you could be deemed uninsured, which is against the law.
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For Low-risk Drivers, Could Self-Insurance Be Better Than Standard Car Insurance?
As a low-risk driver, being self-insured may be an option for you. Self-insurance has pros and cons, so you must consider all aspects before deciding to take on this type of financial responsibility.
One benefit to being self-insured is saving money on insurance costs. You likely have other insurance policies, and those monthly or annual premiums can add up quickly. Also, if you do have an accident, you can pay for the damages and not have to go through the possibility of being denied by the insurance company as if you had a standard auto policy. Additionally, there are no exclusions or coverage limits.
The downside to self-insurance is you could end up financially destitute if the damages total more than you have saved. You also have to have a specified account set up for the funds. Many states require a large deposit to begin the account.
How Does Self-insured Auto Insurance Work?
Several things are required to be considered eligible to self-insure for your auto insurance. First, you have to be able to prove that you are financially responsible. Of course, this would be a requirement since you are taking a risk by not purchasing insurance.
You must pay for all damages. This is important to remember because there could be accidents involving multiple vehicles or high-value property. You have to make a large deposit, the amount set by your state, to begin the account, where you will save your money for auto insurance purposes. If you own many vehicles, you may have to obtain a certificate of self-insurance. Some states even require you to be bonded.
Self Insurance via Cash Deposit In a Special Savings Account
The DMV will accept cash deposits in savings accounts from self-insured drivers. State requirements for depositing money in the account vary. Any damage you cause in an at-fault accident will be paid directly from your local DMV account.
Your account balance will be penalized if you let your insurance lapse or the funds become too low, similar to driving without insurance. Your license could be suspended, your registration could be canceled, and fines could be imposed depending on your state.
Self Insurance via Surety Bond
In some states, you can purchase a surety bond that guarantees you’ll pay for the costs of bodily injury and property damage (just like auto liability insurance) if you are at fault in an accident. This allows you to show you are financially ready to pay any claims that could arise.
The surety company will pay those costs for you if you cannot pay them for whatever reason, but they will expect to recoup those costs from you. You can self-insure your vehicle in your state, but each state has different options and limitations, so check with your local DMV.
What Is a Certificate of Self-Insurance?
Some states will require that you obtain a certificate of self-insurance if you own a certain number of cars. Usually, the number is 25, so these cases can be rare. A certificate of self-insurance is a document that states you are financially responsible for paying for damages that result from bodily injury, property damage, medical bills, and repair costs.
If you are a wealthy person with many cars or a business that owns a fleet and wants to self-insure, check with your state on its certificate of self-insurance laws.
Self-Insurance vs. Driving Without Insurance
When someone knowingly doesn’t purchase car insurance or lets it lapse by not paying the premium, they are considered uninsured. If you feel like you don’t need car insurance, think again. Almost every state has laws requiring car insurance, or at the very least, self-insurance.
If you are pulled over or caught without insurance, you could lose your license, have your registration suspended, face fines and community service, and have trouble purchasing standard insurance at reasonable rates. Sometimes you may even face jail time.
Self-insured people are taking on the risk of paying for any and all damages that could arise from an at-fault accident. This would include damages to their own vehicle.
How Much Coverage Do You Need for Self-Insurance?
You need a minimum amount of money for a state to allow you to have self-insurance. This amount will vary from state to state. It varies from as low as $10,000 to as high as $160,000. You must do research on your state’s requirements, so be sure to check with your local DMV.
Where Is Self-Car Insurance Allowed, and What Are the Requirements?
State | Minimum Coverage Requirements | Self Insurance Requirements |
|---|---|---|
$25,000 bodily injury liability limit per person $50,000 maximum for all bodily injuries per accident $25,000 maximum for property damage per accident | N/A | |
$50,000/$100,000 for bodily injury or death $25,000 for property damage | 25 or more vehicles and $125,000 deposit | |
$25,000 bodily injury liability for 1 person $50,000 for 2 or more persons $15,000 property damage liability | 10 or more vehicles | |
$25,000 for bodily injury or death of 1 person in any 1 accident $50,000 for bodily injury or death of 2 or more persons in any 1 accident $25,000 for damage to or destruction of the property of others | 25 or more vehicles | |
$15,000 for injury/death to 1 person $30,000 for injury/death to more than 1 person $5,000 for damage to property | 1 or more vehicles, $35,000 deposit | |
$25,000 for bodily injury or death to any 1 person in an accident $50,000 for bodily injury or death to all persons in any 1 accident $15,000 for property damage in any 1 accident | 25 or more vehicles | |
$25,000 per person $50,000 per accident for bodily injury liability $25,000 per accident for property damage liability | 1 or more vehicles | |
$25,000 for bodily injury or death of 1 person $50,000 for bodily injury or death of 2 or more persons $10,000 for injury to or destruction of property of others | 15 or more vehicles and proof you can pay a minimum of $15 million | |
$10,000 minimum limits of bodily injury liability per person $20,000 per crash $10,000 property damage liability per crash | 1 or more vehicles and proof you can pay a minimum of $40,000 | |
$25,000 per person Bodily Injury Liability $50,000 per incident $25,000 per incident Property Damage Liability | 1 or more vehicles and $100,000 depsoit with $300,000 authorized investments | |
$20,000 per person $40,000 per accident bodily injury liability $10,000 per occurrence property damage liability | 1 or more vehicles | |
$25,000 per person Bodily Injury Coverage $50,000 per accident Bodily Injury Coverage $15,000 in Property Damage Liability coverage | 25 or more vehicles and net worth of $500,000 | |
$25,000 for injury or death of 1 person in an accident $50,000 for injury or death of more than 1 person in an accident $20,000 for damage to property of another person | N/A | |
$25,000 for bodily injury to or the death of 1 individual $50,000 for bodily injury to or the death of 2 or more individuals in any 1 accident $25,000 for damage to or the destruction of property in 1 accident | N/A | |
$20,000 of bodily injury to or death of 1 person in any 1 accident $40,000 because of bodily injury to or death of 2 or more persons in any 1 accident $15,000 because of injury to or destruction of property of others in any 1 accident | N/A | |
$25,000/person for bodily injury $50,000/accident for bodily injury $25,000/accident for property damage | N/A | |
$25,000 for all claims for bodily injury damages sustained by any 1 person $50,000 for all bodily injury damages sustained by all persons as a result of an accident $25,000 for all property damage as a result of any 1 accident | N/A | |
$15,000 for bodily injury to 1 person $30,000 for bodily injury to more than 1 person in a single accident $25,000 coverage for damage to some1 else’s vehicle or other property | 25 or more vehicles and net worth of $10,000 for each vehicle | |
$50,000 liability for the injury to or death of any 1 person $100,000 liability for 1 accident resulting in injury to or death of more than 1 person $25,000 liability for property damage | N/A | |
$30,000 for bodily injury $60,000 for 2 or more people $15,000 property damage | N/A | |
$20,000 per person – Bodily Injury to Others $40,000 per accident – Bodily Injury to Others $5,000 per accident – Damage to Some1 Else’s Property | N/A | |
$50,000 for a person who is hurt or killed in an accident $100,000 for each accident if several people are hurt or killed $10,000 for property damage in another state | N/A | |
$30,000 for injuries to 1 person $60,000 for injuries to 2 or more people $10,000 for physical damage to the other driver’s vehicle or for damage to property | 25 or more vehicles and net worth of $5 million | |
$25,000 per person (limited to a single accident) $50,000 per accident for bodily injury $25,000 per accident for property damage | 1 or more vehicles and $75,000 bond | |
$25,000 per person for bodily injury $50,000 per accident for bodily injury $25,000 per accident for property | 26 or more vehicles and 3 year’s of financial statements | |
$25,000 because of bodily injury to or death of 1 person in any 1 accident and subject to the limit for 1 person $50,000 because of bodily injury to or death of 2 or more persons in any 1 accident $20,000 because of injury to or destruction of property of others in any 1 accident | Business with a fleet of vehicles | |
$25,000 because of bodily injury to or death of 1 person in any 1 accident $50,000 because of bodily injury to or death of 2 or more persons in any 1 accident $25,000 because of injury to or destruction of property of others in any 1 accident | 26 or more vehicles and $75,000 bond | |
$25,000 for bodily injury or death of 1 person in any 1 accident $50,000 for bodily injury or death of 2 or more persons in any 1 accident $20,000 for injury to or destruction of property of others in any 1 accident | N/A | |
$25,000 per person for bodily injury $50,000 if 2 or more persons are hurt $25,000 for property damage | 1 or more vehicles | |
$15,000 per person – bodily injury liability $30,000 per accident – bodily injury liability $5,000 per accident – property damage liability | 25 or more vehicles and 3 year’s of financial statements plus $1,500 fee | |
$25,000 for bodily injury to or death of 1 person $50,000 for bodily injury to or death of 2 or more persons $10,000 for property damage in any 1 accident | N/A | |
$25,000 for bodily injury and $50,000 for death for a person involved in an accident $50,000 for bodily injury and $100,000 for death for 2 or more people in an accident $10,000 for property damage for a single accident | N/A | |
$30,000 Bodily injury (1 person) $60,000 Bodily injury (2 or more people) $25,000 Property damage | N/A | |
$25,000 per person (the maximum amount payable to 1 person) $50,000 per accident (the maximum amount payable to all people injured in 1 accident) $25,000 per accident – property damage liability | 1 or more vehicles and $155,000 for each vehicle | |
$25,000 for injury/death of 1 person $50,000 for injury/death of 2 or more people $25,000 for property damage in an accident | N/A | |
$25,000 of bodily injury protection per person $50,000 per accident $25,000 of property damage protection | N/A | |
$25,000 per person $50,000 per crash for bodily injury to others $20,000 per crash for damage to others’ property | 25 or more vehicles and $185,000 in funds | |
$15,000 for injury or death of 1 person in an accident $30,000 for injury or death of more than 1 person in an accident $5,000 for damage to property of another person | 1 or more vehicles and $50,000 for 1 vehicle plus $10,000 for each vehicle after | |
$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident | 25 or more vehicles | |
$25,000 per person for bodily injury $50,000 for all persons injured in 1 accident $25,000 for all property damage in 1 accident | N/A | |
$25,000 bodily injury liability insurance per person $50,000 total bodily injury liability per accident $25,000 property damage liability per accident | N/A | |
$25,000 for each injury or death per accident $50,000 for total injuries or deaths per accident $15,000 for property damage per accident | N/A | |
$30,000 of coverage for injuries per person $60,000 per accident $25,000 of coverage for property damage | N/A | |
$25,000 because of liability for bodily injury to or death of 1 person $65,000 because of liability for bodily injury to or death of 2 or more persons arising out of the use of a motor vehicle in any 1 accident $15,000 because of liability for injury to, or destruction of, property of others arising out of the use of a motor vehicle in any 1 accident | N/A | |
$25,000 for 1 person $50,000 for 2 or more persons killed or injured $10,000 for damages to property in any 1 crash | 1 or more vehicles and $115,000 in net worth | |
$30,000 Injury or death of 1 person $60,000 Injury or death of 2 or more people $20,000 Property damage | 1 or more vehicles | |
$25,000 for injuries or death to another person $50,000 for injuries or death to all other people $10,000 for damage to another person’s property | 26 or more vehicles and a $60,000 COD | |
$25,000 per person $50,000 per accident $10,000 Property Damage Liability | N/A | |
$25,000 for 1 crash, 1 injury $50,000 for 1 crash, 2 or more injuries $25,000 for property damage | 1 or more vehicles | |
$25,000 for the injury or death of 1 person $50,000 for the injury or death of more than 1 person $10,000 for property damage | 1 or more vehicles and $160,000 in funds or a bond | |
$25,000 bodily injury 1 person $50,000 bodily injury per accident $20,000 property damage liability | N/A |
How to Become Self-Insured For Auto Insurance
In every state that allows self-insured auto insurance, there are specific steps you need to take to be approved. You cannot simply cancel your standard insurance policy and say you are self-insured.
1. Make sure you meet your state’s self-insurance requirements.
The first step you should take to become self-insured for auto insurance is to check what the regulations are in your state. You can go to your local DMV, and they can help you work through it. You can also research on their website.
2. Make a cash deposit into a special savings account, get a surety bond, or get a certificate of self-insurance.
Depending on your state’s requirements, you then have to prove that you are financially able to be self-insured. You will prove your financial responsibility by opening a special account and making the minimum deposit required by your state, obtaining a surety bond, or a certificate of self-insurance.
3. Notify your state’s Department of Insurance.
You will then need to notify your state’s insurance department with proof of which route you took above. Whether you opened the account to put money back, got a bond, or got a certificate of self-insurance, it should be on record with your insurance department. Your local DMV can help you with their contact information.
4. Receive confirmation of your self-insurance status.
Once you have contacted the department of insurance in your state and provided them with proof of your financial responsibility, they will confirm that you have been approved. Be sure to keep all of your records for when you may end up in an accident.
How to Change Back to Traditional Auto Insurance Later
If you change your mind or are self-insured for a while and want to switch back to traditional car insurance, shop around for a policy that meets your needs. Once you decide which policy to purchase, you will call your insurance department again and provide proof of auto insurance.
Is Self Insurance a Good Idea?
For the average driver, self-insurance is not the best option. With the rising costs of car repairs and increased accidents on the road, it can be a huge risk to take on financially. However, if you still want to consider it, these types of drivers could be good candidates:
- Low-risk driver: If you don’t drive often but still own a car for emergencies, you could be a good candidate for self-insurance.
- Business Fleet: A business with a large fleet and high cash flow could consider self-insured auto insurance.
- Claims-free driver: If you have never had a claim and want to stop paying high auto insurance premiums, you may want to consider a self-insurance option.
How to Decide If You Should Self-Insure Your Car
There are two main things to help you decide if you should self-insure your car: if you can financially pay for damages and are a low-risk driver with little to no claims history.
Can you comfortably afford unexpectedly high costs?
Around 38,000 people die in car accidents yearly, with even more sustaining injuries. Death settlements result in over $55 billion each year as well. Putting this into perspective, and not including property damage, this is a considerable risk to take on.
Can you keep up with your state’s requirements to keep your self-insurance status active?
Each state has different regulations to follow to become and stay self-insured. If you should lose your job or face some other financial hardship, this could impact your ability to pay for damages, resulting in you losing your self-insured eligibility.
Also, laws change constantly, and it will be your responsibility to stay current with those in your state. Are you able to keep up with that if you decide to self-insure?
Do your driving habits make you a low risk for accidents and collisions?
Do you live in an area with a low population, and not many cars are on the road? Do you work from home and only go out once a week? If your unique situation is such that you don’t drive often or fave little to no risk when it comes to driving, this could help you decide to self-insure.
Consider your driving history. If you have not had any violations or accidents, that would be a positive sign that you are a low-risk driver and may be eligible for being self-insured if you have the means.
Putting It All Together
Nearly every state requires car insurance for an excellent reason: drivers who cause damage to other people and their property are expected to pay for it, and most people cannot. A car insurance policy can pay for the damage you cause in an accident if you don’t have the means to pay for it yourself.
However, many states now offer self-insurance options if you can pay these out-of-pocket costs. Self-insurance isn’t suitable for everyone, even if available in your state. You must weigh the pros and cons of your own situation before making a decision.