Can I Self-Insure My Car?
Last Updated on January 26, 2026
Self-insuring your car means you’re choosing to pay losses yourself instead of transferring risk to an insurance company. In practice, it usually requires (1) meeting your state’s “financial responsibility” rules and (2) having enough cash flow and assets to handle claims, legal defense, and judgments.
For most drivers, “self-insuring” isn’t as simple as canceling a policy. Many states require active auto insurance (or an approved alternative) to register and drive legally—especially in places like New York where insurance is generally required by law. (If you’re in NY, start here: Is car insurance required in New York?.)
At a Glance
- Not Just “Canceling Your Policy”: Most states require insurance or an approved alternative to register and drive legally.
- Usually A Fleet Strategy: Certificates of self-insurance are commonly designed for owners with many vehicles and strong financials.
- You Pay Claims And Defense: Without a carrier, you fund losses, handle negotiations, and cover legal costs out of pocket.
- Cheaper Options Exist: If cost is the issue, shopping rates, raising deductibles, and using discounts are typically safer than self-insuring.
What “Self-Insuring a Car” Really Means
People use “self-insurance” to describe a few different setups. The big difference is whether your state will accept an alternative to a traditional auto policy.
Common Ways States Handle “Self-Insurance”
| Approach | What It Is | Who It’s Usually For | What To Watch |
|---|---|---|---|
| Certificate of Self-Insurance | The state approves you to act like your own insurer after you prove financial ability. | Often fleet owners (many vehicles), commercial operators, or large entities. | Strict eligibility, ongoing oversight, and you still pay claims and defense costs. |
| Surety Bond | You buy a bond that guarantees payment up to the bond amount if you cause damages. | Available in some states as an alternative to a policy. | A bond isn’t “coverage” for your car; you may have to reimburse the surety. |
| Cash/Security Deposit | You deposit approved funds/securities with the state to satisfy financial responsibility. | Available in some states, sometimes even for individuals. | Ties up capital; may not cover everything a normal policy does (like claims handling). |
Important: Even when a state allows an alternative, it typically replaces liability (and sometimes required no-fault/PIP). It does not automatically replace collision/comprehensive, towing, rental, or other optional coverages that many drivers rely on.
How Self-Insurance Works in Real Life
With a traditional policy, the carrier collects premium, investigates claims, hires defense counsel, negotiates settlements, and pays covered losses (subject to terms and limits). With self-insurance, you become the claims department—or you pay vendors to do it.
- You fund losses: Vehicle repairs, medical bills you’re legally responsible for, property damage, and possible court judgments.
- You handle claims: You’ll need a process for documentation, negotiation, and payment—often using third-party administrators (TPAs).
- You handle legal defense: Serious crashes can trigger lawsuits. Defense costs can be substantial even before any settlement or judgment.
- You pursue the other driver when appropriate: If you’re hit by someone else, you may still pursue their insurer—but timelines and proof matter. (Related: what to do after a not-at-fault accident.)
Quick tip: If you lease or have a loan, your lender typically requires comprehensive and collision—“self-insuring” liability won’t satisfy that contract requirement.
Is Self-Insurance Allowed in New York?
New York generally requires NY-issued auto liability coverage to register a vehicle, and the DMV can suspend registrations and licenses for lapses. New York’s “self-insurance” pathway is primarily designed for registrants with more than 25 vehicles who apply for a certificate of self-insurance under state law. For broader state requirements, see New York insurance laws and requirements.
If you’re evaluating self-insurance in NY for a fleet, plan on a formal application, proof of ongoing financial ability, and ongoing obligations (including fees assessed per vehicle). You’ll also want professional guidance on claims administration and legal defense strategy.
Why Self-Insurance Is Risky for Most Drivers
Most drivers buy insurance because one serious crash can create expenses far beyond a typical savings account. Liability exposure can include medical costs, lost income, pain and suffering, property damage, and legal fees. A policy is a risk-transfer tool; self-insurance is risk-retention.
- Cash-flow shocks: Losses don’t arrive on schedule, and a single event can be financially devastating.
- Complex claims: Disputes over fault, injuries, and damages can take months (or years) to resolve.
- Compliance consequences: Driving without an approved method of financial responsibility can lead to fines, suspensions, and major out-of-pocket exposure. (See: what happens after an accident without insurance.)
- No built-in services: No insurer-provided adjuster, defense counsel panel, roadside help, or replacement vehicle benefits unless you pay separately.
Quick tip: If you’re considering self-insurance, keep the reserve funds in a dedicated account and treat it like a claims budget—not a general emergency fund.
Where Self-Insurance Is More Common
Self-insurance is most common for organizations that can spread risk over many vehicles and many years—think delivery fleets, municipalities, or large businesses. If you’re insuring multiple vehicles for work, you may want to compare traditional commercial policies vs. risk-retention options with an advisor. (Related: commercial auto insurance options in New York.)
Examples of State-Approved Alternatives
Rules vary by state, and the term “self-insurance” isn’t used consistently. For example, New Mexico allows a surety bond or cash deposit of $60,000 as evidence of financial responsibility. New York’s certificate of self-insurance is geared toward registrants with more than 25 vehicles. Always confirm details with your state DMV and insurance department before making changes.
Alternatives If You Can’t Afford Insurance
If your goal is lowering premiums (not running a fleet), you usually have safer options than “going without.” Start with practical levers that reduce cost while keeping legal coverage in place.
- Shop and re-quote: Rates can vary widely—especially at renewal. Here’s a guide to switching auto insurance smoothly.
- Adjust coverage strategically: Consider higher deductibles (if you can cover them) and remove optional coverages only after you understand the consequences.
- Look for discounts: Defensive driving, telematics, bundling, low-mileage programs, and pay-in-full can help.
- Use a plan if you’re struggling: If your budget is tight, review these steps for what to do when you can’t afford car insurance.
- Compare reputable carriers: Start with a shortlist of lower-cost auto insurers in New York and compare apples-to-apples limits.
The Bottom Line
Yes, self-insuring a car can be possible—but it’s typically meant for fleets or special cases where a state approves an alternative to a standard policy. For most individual drivers, self-insurance creates more legal and financial risk than it solves. If you’re considering it, confirm your state’s rules in writing and think through claims handling, legal defense, and worst-case loss scenarios before you drop coverage.
Editorial note: This article is for general informational purposes only. Auto insurance and financial responsibility rules vary by state and can change over time. For official guidance, check your state DMV and insurance department.