These States Do Not Require Auto Insurance
This may not be the bargain it sounds like
Car Insurance is a major cost of car ownership, but it is considered so important that most states require coverage by law. However, not all 50 states require coverage, and many states offer alternatives to insurance company coverage.
Even in the states with no car insurance requirement, it's not good to forego car insurance coverage. That's because these states don't allow car owners to escape the costs of an accident. You might not get fined for driving without insurance, but you will be held liable for the costs if you are found at fault.
You could save money over time—especially if you don’t get into an accident.
You’re not affected by shifts in insurance rates.
Any money saved by not having insurance could be lost if you get into an accident—you’re still financially responsible for damages.
Drivers who are not able to pay for damages may have their licenses and registrations suspended.
States With No Car Insurance Requirement
There are just two states that don't require car insurance: New Hampshire and Virginia.
Car insurance is not mandatory in New Hampshire, but residents are still responsible for damages resulting from a car accident: up to $50,000 for liability and $25,000 for property damage. Drivers who are not able to pay for damages can expect to have their licenses and registrations suspended.
Virginia residents can skip getting car insurance if they pay the state $500 per year. However, that does not provide accident coverage of any kind. The driver who caused the accident is still liable.
The Bond Option
Several states offer drivers the option of providing proof of financial responsibility in lieu of car insurance. This state option usually requires purchasing a bond for a set amount of money that will be used in case of an accident. In some states, a cash deposit can be used.
The driver will purchase the bond for the amount required by the state. If there is an accident, the bond covers the expenses up to its limit. The driver then must repay the money paid out.
The bond is associated with the driver—not the car—so that the bond buyer can drive any vehicle. The drawback is a financial one. In an at-fault accident, the driver is required to repay the expense in full plus interest.
That may sound like a good deal, but costs can add up fast in even a minor car accident. Let’s say you get in a minor fender bender with another vehicle. The damage to the fender might be a few hundred dollars. However, the other party might also experience whiplash, putting you on the hook for their medical expenses and physical therapy for months to come, not to mention legal fees on your end.
Showing Proof of Financial Responsibility
Drivers who opt out of auto insurance need to provide proof of financial responsibility like other drivers. Instead of carrying insurance cards, they have to carry copies of their bonds and show them to the police if they are pulled over for traffic violations.
The real trouble comes when a driver is in a car accident, or even just pulled over and can't provide proof of car insurance or financial responsibility. There's a good chance the driver's license and registration will be suspended. Getting them reinstated will require you obtain proof of insurance or financial responsibility. In some states, repeat offenders are required to have insurance coverage for a stated length of time, such as three years.
State of New Hampshire Insurance Department. "Your Guide to Understanding Auto Insurance in the Granite State," Page 1. Accessed July 6, 2020.
Virginia Department of Motor Vehicles. "Insurance Requirements." Accessed July 6, 2020.
Vokshori Law Group. "An Alternative to Car Insurance: Surety Bonds." Accessed July 6, 2020.
Ohio Department of Insurance. "Financial Responsibility Compliance: FR Bond Facts." Accessed July 6, 2020.
Absolute Surety. "Auto Insurance Bonds." Accessed July 6, 2020.
Idaho Transportation Department. "Be Sure to Insure!" Accessed July 6, 2020.