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 offer alternatives to insurance company coverage.
Even in the states with no car insurance requirement, it's not good to forgo car insurance coverage, because those 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 to have been at fault.
- Car insurance is so important that most states require coverage by law, but not all states mandate it.
- The states that don't require coverage are New Hampshire and Virginia.
- Even if you aren't required to have coverage, you won't escape the costs associated with a car accident.
- If you don't want to have pay for insurance, you'll likely have to show proof of financial responsibility.
Pros and Cons of Not Having Car Insurance
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 cannot 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 quickly in even a minor car accident. Suppose 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 to 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.
Frequently Asked Questions (FAQs)
Why is car insurance required?
The primary reason that car insurance is mandatory is to protect the victims in an accident. If you're at fault in an accident, and you don't have insurance, you might not have the means to cover damages to property or people in the other vehicle. Liability coverage ensures that the other driver will have their damages covered.
What is the minimum required car insurance in most states?
Most states require liability coverage for bodily injury and property damage, which covers the other driver if you're at fault in a wreck. The exact amount of required liability coverage varies by state, and some states require additional coverage, such as uninsured motorist or personal injury protection.
What insurance is required for a financed car?
If you finance a car, your lender will probably require additional insurance above your state requirements. A lender wants to ensure that its collateral—in this case, your car—is protected. At a minimum, most lenders will require you to carry comprehensive and collision coverage until your loan is paid off.