Which States Do Not Require Car Insurance and Why?

Is Proof of Financial Responsibility Cheaper Than Buying Car Insurance?

Hands up, while driving a convertible.
Daniel Milchev / Getty Images

Car insurance is an expensive part of owning a car. It is considered to be so important most states require it by law. Most states, I say most states all the time but which states are the states that do not require car insurance? How could it possibly not be a requirement? 

Technically, no car insurance requirement is not the freebie many people might think it to be. Even though a fine might not be charged for driving without it, you will still be held liable in an at-fault accident.

And some states are stricter about providing proof of financial responsibility than others.

Which States Do Not Require Car Insurance?

  • New Hampshire: Although car insurance is not mandatory in NH, you are still responsible for damages up to $50,000 for liability and $25,000 for property damage. Expect a suspended license and registration for not being able to pay for damages of an accident you or your vehicle caused.
  • Virginia: Don't want to pay for car insurance in Virginia? You have the option to pay the state $500 annually but that would not provide any coverage. You would still be held liable if you caused an accident.

Drivers in both New Hampshire and Virginia usually opt to buy car insurance even though it is not required. The cost of car insurance is low compared to the potential loss of an at-fault car accident. The national average of uninsured motorist in 2012 was 12.6 percent according to the Insurance Information Institute.

New Hampshire was at 9.3 percent and Virginia was listed at 10.1 percent both lower than the national average.

What Is Proof of Financial Responsibility?

Proof of financial responsibility is in fact, car insurance. But there are other options in providing proof of financial responsibility. Usually, it involves tying your money up and setting it aside just in case of an accident.

Many states allow drivers to purchase a bond or even deposit cash with the state.

Which States Offer an Alternative to Car Insurance?

The cost of bonds vary. The better your credit score and assets the better rate you will get on the bond. You purchase the bond for the amount required by your state. Then if there is an accident the bond will cover the expenses up to its listed limit. Finally, you pay back the money paid out by the bond.

30 States Offer Bonds or Cash Deposits in Place of Car Insurance

  • Alabama
  • Arizona
  • California
  • Colorado
  • Delaware
  • Idaho
  • Indiana
  • Iowa
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • New York
  • North Carolina
  • Ohio
  • Oklahoma
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Virginia
  • Washington
  • Wisconsin
  • Wyoming

Lots of states may offer car insurance alternatives. Check with your local DMV, Department of Motor Vehicles, to see if a bond is available. Bonds follow you so regardless of the vehicle you drive, the bond would make it legal to drive. The bad part is if there is an at-fault accident, you have to pay back the expense in full plus interest just like a loan.

Be Prepared to Show Proof of Financial Responsibility

You need to provide proof of financial responsibility the same way you show proof of car insurance.

Have a copy of the bond available anytime you drive. It will need to be provided to a police officer if you are pulled over for a traffic violation or if you are in an accident.

Going Without Car Insurance

No car insurance is a pretty big gamble. There is some potential to save some money over time. But there is also potential to lose big if you are ever in an at-accident. You will be personally responsible for everything including damages to the other person's property, injuries, and for damages to your own property. For most people, car insurance is the best option.

Caught Driving Without Car Insurance or Financial Responsibility

If you are in a car accident or ever pulled over without having proof of car insurance or financial responsibility there is a good chance your driver's license and registration will be suspended.

Then you may be required to file an SR-22 on your car insurance policy to provide proof of insurance before getting your registration reinstated. This means a bond is no longer an option and car insurance is required at all times for a stated amount of time, often three years.