Alternatives to Car Insurance: Surety Bonds

Surety bonds are available as alternative car insurance in some states and start at $100. Bonded car insurance companies may be hard to find, but can be an affordable option that might work for you.

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UPDATED: May 25, 2022

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Written By: Laura BerryReviewed By: Joel OhmanUPDATED: May 25, 2022Fact Checked

Here's what you need to know...

  • Surety bonds are a valid alternative to car insurance coverage
  • Not all states allow surety bonds
  • You should research your options before deciding whether alternative car insurance is right for you

As an alternative to car insurance, surety bonds may be available in your state. But are they a good choice for you?

Generally, most people today purchase car insurance because it is required by law. Each state has its own laws concerning their citizens’ civic responsibility, and individuals must abide by these laws to prevent being penalized.

However, there is an alternative to car insurance for drivers in many states; they’re called surety bonds. Surety bonds are expensive, but they may be right for you if you are unable to find cheap car insurance.

How do you know if alternative car insurance is the right choice for you? Keep reading to learn the benefits, as well as the requirements for surety bonds.

Even if you’re considering alternatives, it’s best to shop around. Before deciding on surety bonds, compare car insurance rates from multiple providers by entering your ZIP and get free car insurance quotes.

What do you need to know about surety bonds?

Is a surety bond the same as car insurance? It is not the same, but it is a valid alternative. 

Ideally, an alternative way to insure yourself is through surety bonds. By doing this, you are avoiding purchasing a standard car insurance policy from an ordinary insurance company.

There are many different types of surety bonds, such as performance bonds, construction bonds, commercial bonds, and contract bonds.

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What’s the difference between surety bonds and car insurance?

The main difference between surety bonds and car insurance is the amount of risk you are willing to take.

Car insurance will pay for damages, up to the limits on your policy. Your only out-of-pocket cost will be the deductible you choose for your policy. That’s usually $500 or $1,000.

A surety bond means that you are totally responsible for all damages and have to pay the entire amount out of pocket. Your bond company will pay the charges upfront with you repaying the amount with payments.

Another difference is that you would pay for the bond upfront at a usually lower rate than car insurance. Your car insurance would be paid monthly or yearly.

The last major difference is the way bonds and insurance are priced. Surety bonds are priced based on your financial stability and ability to repay the bond.

Car insurance, on the other hand, is primarily priced based on your driving record and the location of the car.

Where can I use a bond instead of car insurance?

What is an insurance bond for a car?

While this choice is not available in all 50 states, if you’re fortunate enough to live in a state in which surety bonds are an option (surety bonds are available in California, for instance), you can buy a bond for the exact same amount as the bare minimum insurance policy coverage, per your state’s insurance laws.

This table shows you the states that allow surety bonds and the amounts required.

States that Allow Surety Bonds
StateAmount of Surety Bond Required
New Mexico$60,000
New York$25,000
North Carolina$85,000
Rhode Island$75,000
South Carolina$35,000
South Dakota$25,000
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Additionally, you also have the option of paying a down payment to the DMV for the same cash equivalent as insurance coverage. However, surety bonds are still most likely a better option because you pay only a percentage of the amount rather than the face value.

Before deciding to purchase a surety bond, you would want to research whether surety bonds are available in your state.

Once you have confirmed this fact, you should consider shopping multiple surety bond insurance companies to be certain that you have chosen a reputable, well-established one that has been in business for a number of years.

If you find a bond insurance company that you want to work with, make arrangements with one of the company’s sales representatives to make payment and complete all the required paperwork for the bond to be secured.

Once secured, proof of payment for the bond will be provided by the surety company, and it must be carried in the vehicle at all times.

This video discusses a little bit about surety bonds instead of car insurance.

Surety bonds aren’t allowed everywhere, so you will have to do some research to see if your state gives you that option.

How much does a car insurance bond cost?

This depends largely on your credit score and the surety bond company you choose. Surety bonds, per the NASPB, of $7,500 can cost you anywhere from $100 to $1,000, depending on your credit score.

This table shows some examples from the site.

Surety Bond Cost by Credit Score
Credit Score$5,000 Bond$10,000 Bond$25,000 Bond$50,000 Bond$100,000 Bond
700$100$100$188- $375$375- $750$750- $1,500
650-699$100 $100-$300 $250-$750 $500-$1,500 $1,000-$3,000
600-649$125-$250 $250-$500 $625-$1,250 $1,250-$2,500 $2,500-$5,000
550-599$250-$375 $500-$750 $1,250-$1,875 $2,500-$3,750 $5,000-$7,500
Under 550$375-$500$750-$1,000$1,875-$2,500$3,750-$5,000
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You can see that a lower credit score will cost you more money. The higher your credit score, the better the surety bond price.

Why would you purchase alternative car insurance?

Perhaps the most common reason for purchasing car insurance is to protect your financial assets; it’s as simple as that. You must compensate the injured party if an auto accident is proven to be your fault. This includes:

  • medical bills
  • repair bills
  • funeral expenses

Without this insurance, the burden will land directly on you, and it’s possible you could lose all your valuable financial possessions in the end.

Only a very small percentage of the population is able to pay out of pocket for a large car insurance claim or car insurance settlement, or for that matter, even a small one.

In what ways are surety bonds not like insurance policies?

Without car insurance as financial protection, the payment for such claims or settlements would have to come from somewhere. This is where surety bonds come into play.

To sum it up, a surety bond is cheaper than traditional car insurance and there is no deductible. It protects against liability issues. If you don’t own a car, then you may need to get a personal umbrella policy. Your credit history plays a role in how much you’ll pay for a surety bond.

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Is there auto bond insurance for businesses?

In a number of states, surety auto insurance bonds are not available. Instead, individuals must rely on ordinary insurance or pay the Department of Motor Vehicles a cash deposit. However, a business owner would be in the position to take full advantage of surety bonds.

It’s important to remember that each state will have its own set of rules and requirements for this type of financial safety.

For example, according to Washington state’s Department of Licensing, at least 26 vehicles must be owned and a minimum of $60,000 must be secured to even qualify for a surety bond. The state’s Department of Motor Vehicles can provide specific and additional details concerning this issue.

Every individual needs to consider whether alternative car insurance–such as surety bonds–is a better choice than ordinary car insurance.

Purchasing a car insurance policy is certainly the most popular option, as it’s simple and convenient to do.

However, you might consider purchasing a surety bond instead if the insurance rates you’re quoted are too expensive, or if you’re unable to secure a regular policy for some other reason.

Businesses with a fleet of vehicles may want to think carefully about their choices, but buying a surety bond is generally more economical in the long run than paying for commercial car insurance.

What’s the bottom line on car insurance bonds?

A surety bond is similar to a car insurance policy. It protects against loss due to theft, fire, vandalism, etc. There are several different types of surety bonds. Some cover just one vehicle while others protect fleets of cars. You should always check with your local DMV first when considering any kind of surety bond. They can help you determine which type of surety bond is best suited for your situation.

Make sure you know your options before you buy car insurance. Before deciding a surety bond is for you, compare alternative car insurance rates from multiple companies, by entering your ZIP.

Frequently Asked Questions: Surety Bond Car Insurance

Take a look at some more FAQs about surety car insurance bonds.

#1 – What is surety insurance?

Surety insurance is the same thing as a surety bond. In many states, it’s grouped under insurance and can be called that as well.

#2 – What are some alternative car insurance companies?

Is there an alternative to traditional car insurance companies?

There is no free program that replaces auto insurance, but traditional car insurance isn’t the only option. Even if a surety bond isn’t for you, there are some alternatives to traditional car insurance companies out there.

The biggest type would be pay-per-mile car insurers like MetroMile and Root Insurance.

#3 – Should you drive without car insurance?

Almost all states require some sort of car insurance or surety bond. If you don’t follow you’re state’s guidelines, you will be driving illegally. Penalties include fines, having your driving license suspended, and possible jail time.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

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