What Is Self-Insurance?

It's possible to insure your own vehicles. Learn more about how self-insurance works and how to get it here.
Man in car with smile on his face.

Every state, except New Hampshire and Virginia, requires car insurance to drive. But you don’t always need to buy it from an insurer. If you can afford it, you may be able to self-insure your vehicles.

Self-insurance is when you put up a large amount of money to prove you’re able to cover the costs of an accident. Rather than paying monthly premiums and a deductible, you’ll need to set aside thousands of dollars ahead of time. By doing this, you prove that you’re financially responsible.

This article will explain how self-insurance works and what you need to do to be eligible. You’ll also learn about the pros and cons of insuring your vehicles.

How Self-Insurance Works

With self-insurance, you’re the one responsible for any expenses after an accident. This means that if you cause an accident, you must pay for the damages out of pocket. For this reason, self-insurance is mainly an option for business owners or those with a ton of money.

How to Self-Insure Your Car

To insure your vehicle(s) on your own, you must either place a cash deposit with your state or be able to prove a certain net worth. In California, you must deposit $35,000 to be eligible for self-insurance. On the other hand, Florida requires a net worth of $40,000 before you can self-insure a car. Either way, you’ll need a lot of money on hand to be eligible.

You may also need to insure several cars at once to be eligible. As an example, Arizona requires you to insure ten or more vehicles to be eligible. This caters more to business owners with entire fleets of cars. It often doesn’t make sense or isn’t legal for an average car owner to self-insure.

Once you prove your financial responsibility, your state will typically issue you a self-insurance certificate. This serves as your proof of insurance, allowing you to legally drive or register a car.

Keep in mind that every state has different rules regarding self-insurance. Below is a table listing each state’s self-insurance financial requirements and the minimum number of cars:

StateVehicle LimitLiability Requirement
Alabama25+$100,000
Alaska25+$125,000
Arizona10+$90,000
Arkansas25+$100,000
CaliforniaAny amount (commercial only)$750,000
Colorado25+$90,000
ConnecticutAny amount$70,000
Delaware15+$1,500,000
FloridaAny amount$40,000
GeorgiaAny amount$50-100,000 (depends on the number of cars)
HawaiiAny amount$300,000
Idaho25+$100,000 (minimum net worth of $500,000)
Illinois25+$95,000
IndianaCommercial only$100,000
Iowa25+$75,000
Kansas25+$100,000
KentuckyAny amount$100,000
Louisiana25+$70,000
MaineNot disclosed$125,000
Maryland26+$105,000
MassachusettsN/AN/A
MichiganAny amount$750,000
Minnesota25+$100,000 (minimum net worth of $5,000,000)
Mississippi25+$100,000
Missouri26+$85,000
Montana25+$95,000
Nebraska26+$100,000
Nevada10+$95,000
New HampshireAny amount$100,000
New Jersey25+$80,000
New MexicoAny amount$85,000
New YorkAny amount$85,000
North Carolina26+$85,000
North DakotaAny amount$50,000
Ohio26+$100,000
Oklahoma25+$100,000
Oregon25+$95,000
PennsylvaniaAny amount$50,000
Rhode IslandAny amount$100,000
South Carolina25+$100,000
South Dakota25+$100,000
Tennessee25+$90,000
TexasAny amount$115,000
UtahAny amount$105,000
VermontAny amount$85,000
Virginia21+$110,000
Washington26+$85,000
West Virginia25+$100,000
Wisconsin25+$85,000
Wyoming25+$95,000

Who Should Self-Insure Their Car?

Self-insurance isn’t for everyone. Most people are better off buying standard insurance. In fact, that’s usually the only option. Despite that, self-insuring your cars may make sense if you fit into one of these categories:

Rich People

For most people, the expenses after an accident are too much to bear without insurance. However, wealthy people have the means to cover many costs thrown their way. Self-insurance may make sense for you if you have the money to cover an accident’s costs without help.

Most states require you to place a deposit/bond or prove your net worth if you want to insure your own vehicles. Only wealthy people have enough on hand to prove financial responsibility in this way.

Business Owners

Self-insurance may make sense if you’re a business owner, large or small. It’s common for businesses to have a fleet of vehicles for a variety of reasons. All of these cars need insurance to drive, but it’s possible to self-insure them. If your company can afford it, you can cut out the middleman and insure them on your own. Keep in mind that most states require you to have at least 25 vehicles to get self-insurance.

Car Collectors

Collectors may benefit from self-insurance. In this case, you may fit the vehicle number requirement in most states. With self-insurance, you ensure that your cars have coverage, but you don’t need to pay a monthly premium. And, with your cars staying put most of the time, you might even save money by going this route. Compare collector car coverage rates and decide for yourself.

Pros and Cons of Self-Insurance

In most cases, it’s easier to just buy coverage from an insurer. But there are advantages to self-insurance. Below are the pros and cons of getting it:

Pros

  • No insurance premium. There’s no monthly premium bleeding your money away. This makes it easier to save money or allocate it toward whatever you want.
  • No insurer to deal with. Insuring your own cars means you don’t need to deal with another company. This means no claims process, extra paperwork, or bills.
  • You don’t have to worry about coverage limits. Because you’re covering everything, you won’t need to stress about having enough coverage or high enough limits to meet a state requirement.

Cons

  • It’s expensive. To even qualify for self-insurance, you need to put down a ton of money. Then, you’re on the hook for all expenses after an accident if you’re at fault.
  • It may not be legal. Some states don’t even let people self-insure their cars unless they own several or have a company. For this reason, it’s not an accessible option.
  • Everything is on you. With self-insurance, it’s all on you. Expenses, planning, handling the other driver, legal issues, etc. If you can’t handle this or don’t want to, it may be better to just pay an insurer to do it.

Frequently Asked Questions

Q: How do I get self-insurance?

A: To insure your own cars, you’ll have to pay close attention to your state’s rules and requirements. Some want you to have at least 25 cars to be eligible. Others require a certain net worth or cash deposit.

In general, you will have to apply for a self-insurance certificate from your state. If you meet all of the requirements, you’ll receive the certificate.

Q: What is a self-insurance certificate?

A: A self-insurance certificate verifies that you may legally insure your own vehicles in your state. It also serves as proof of insurance. This means that if you get into an accident or are pulled over by the police, you must have this in your car.

Q: How much does it cost to be self-insured?

A: Simply put, self-insurance will cost you a lot upfront. Most states require tens of thousands of dollars in either net worth or a cash deposit. At times, you may even need hundreds of thousands or millions.

Something else you should consider is how much money it’ll cost if you get into an accident. You must be able to cover the costs of an accident to self-insure. Otherwise, you could end up in major financial trouble. For this reason, self-insurance is mainly an option for the rich.

Q: Should I self-insure my car?

A: This depends on your current financial situation. If you’re a high net-worth individual, then it may make sense for you if you’re willing to take on the risk. Otherwise, it’s easier to just pay an insurer to handle all the stress.

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