These States Don't Require Auto Insurance
This may not be the bargain it sounds like
Insurance is a major cost in car ownership but it is considered so important that most states require coverage by law. Surprisingly, not all require coverage, and many states offer alternatives to insurance company coverage.
In any case, none of these states allows 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.
States With No Requirement
There are just two of them.
Car insurance is not mandatory in New Hampshire, but residents are still responsible for damages, 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 the car insurance and pay the state $500 per year. That does not provide accident coverage of any kind. The driver who caused the accident is still liable.
Most drivers in both states opt to buy car insurance. In fact, the national average of uninsured motorists in 2012 was 12.6 percent, according to the Insurance Information Institute. But New Hampshire's rate of uninsured was 9.3 percent and Virginia's was 10.1 percent.
The Bond Option
A number of states offer drivers the option of providing proof of financial responsibility in lieu of car insurance. This 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 purchases 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 the bond buyer can drive any vehicle. The drawback is financial: In an at-fault accident, the driver is required to repay the expense in full plus interest, just as in a loan.
Where a Bond Is an Option
Thirty states offer the option of buying a bond or depositing cash as an alternative to maintaining 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, and Wyoming
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.
Pros and Cons
Skipping car insurance is a big gamble. There is some potential to save money over time. But there is also the potential to lose big if you are ever in an accident. For most people, car insurance is the best option.
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 proof of insurance. At that point, a bond is no longer an option and the driver is required to have insurance coverage for a stated length of time, often three years.