Every state requires motorists to carry some form of financial responsibility. Most people automatically translate that require into a requirement to have auto insurance, but most states also allow you to self-insure your vehicle. This is more common with businesses than individuals, but it is an option if you want to take it.
Self insurance can take several forms. You can purchase a surety bond, make a deposit with the DMV or state Department of Insurance, or through some other form of secure deposit. In all cases, the amount of your self insurance must meet or exceed the state required insurance minimum.
The idea is that you have to set aside money to cover your insurance needs. If you are found at fault in an accident, the money would be used to pay for damages and injuries, and can even be channeled into your defense if litigation arises.
Colorado and a few other states limit self insurance to businesses or individuals with a large number of cars. In Colorado, you must own at least 25 cars, but the requirements vary by state. Contact your state Department of Insurance or the Department of Motor Vehicles to find out how the self insurance law works in your area.
Most states will require you to deposit the required amount with the state. This could mean a deposit with either the DMV or the Department of Insurance, according to state law. This must meet the minimum requirements, and usually ranges from $10,000 to $60,000. Because of the large investment, self insurance is not available to a majority of drivers.
Some states will allow you to use a surety bond instead of cash deposit. In those states, you only have to pay a percentage of the requirements up front. This makes self insurance easier for most people, but has the disadvantage that you could be responsible for the remainder of the cost at moment, entirely out of pocket.
Make sure you have enough coverage, not the minimum. If you self insure and the accident costs more than what you deposited, you are still responsible for the rest of the damages and injuries. For this reason, it is much better to deposit an even larger amount, just in case of the unexpected.