Does California Offer Alternatives to Car Insurance?

3 minute read

Hopefully, you’re aware that carrying Car Insurance is a requirement in the state of California for all drivers. In fact, the law requires all motorists to obtain an auto policy. Just in case you didn’t know, you cannot legally drive without Auto Insurance coverage in California. This fact may not bode well for drivers with a not-so-great record. Such drivers may have increased Auto Insurance premiums, or they may not be able to find insurance at all.

This is why there are actually some alternatives to a standard Auto Insurance policy. Read on to find out more about your options.

The Car Insurance Loophole in California

Where there’s a will, there’s a way. If you want to get technical about it, there are ways you can legally drive in the Golden State without a Car Insurance policy. In fact, California is one of several states that has a “loophole” of sorts when it comes to mandatory Auto Insurance.

Why is this? Well, as heavily regulated as insurance companies are in California, they’re still private companies. In most instances, you cannot force a private company to sell one of its products to a consumer. There are also cases where an insurer might deem a driver too risky for an Auto Insurance policy. For example, most companies do not want to insure a driver that has dozens of moving violations, multiple accidents and/or DUIs on their record. That’s why alternatives to Car Insurance exist. They are sort of a work-around for people who cannot qualify for Auto Insurance in the marketplace.

Options for Driving Without Car Insurance

For individual drivers in California, there are two options that will make them eligible to drive legally without Auto Insurance.

  1. car insurance costCash Deposit. A driver in California can opt to make a cash deposit of $35,000 to the state’s Department of Motor Vehicles. The deposit is then set aside in case the driver causes an accident. The funds will be used to pay for property damage and/or medical expenses to the victims of the accident. This deposit is refundable, minus any distributed funds for accidents, whenever the person either buys Car Insurance or surrenders their driver’s license.
  2. Surety Bond. This second option is similar, but doesn’t cost nearly as much. A driver can purchase a surety bond of $35,000 from an insurance company. Similar to a bail bond, you would only have to pay a small percentage as a down payment. This is typically more affordable than forking over the entire amount. The percentage is usually 4% or lower, but it can be as high as 15%. However, a surety bond issuer will be entitled to the rest of the funds if the bondholder gets into an accident. The leftover money will be used to pay the accident victims for damages or injuries.

Car Insurance is Better than the Alternatives

As you can see, obtaining a $35,000 surety bond is usually more attractive than parting with a $35,000 cash deposit. But for most people, securing an Auto Insurance policy is much easier and more affordable than both alternatives. With Car Insurance, your savings aren’t put at risk of being confiscated to pay back a surety bond after an accident. So, unless you cannot find a company that will insure you and your car, it’s almost always better to obtain traditional Car Insurance coverage rather than one of the alternatives.

In general, Car Insurance can be a lot more affordable than you might think. Your rates are determined by a number of complicated factors, like zip code, traffic violations, age and more. Many insurance companies also offer a variety of discounts that can lower your rates. If you’re concerned about cost, speak with an Insurance Specialist today.

Speak with an Insurance Specialist

Auto Insurance Specialists has been providing coverage for Californians for over 40 years. We now provide drivers with coverage in all 50 states. Our agents know how to find policies for hard-to-insure drivers. They can find you competitive low rates from multiple insurance carriers in minutes. So, before you even think about looking into alternatives to Car Insurance, give AIS a call at (855) 919-4247 to see if you can get the coverage you need.


This content is offered for educational purposes only and does not represent contractual agreements. The definitions, terms and coverage’s in a given policy may be different than those suggested here. Such policy will be governed by the language contained therein. No warranty or appropriateness for a specific purpose is expressed or implied.