Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Here's what you need to know...

  • Car insurance protects against loss in the event of an auto accident and consists of different types of coverages
  • Almost every state requires a minimum level of auto insurance coverage
  • Massachusetts was the first state to require auto insurance in 1927, and 48 states have followed suit since then
  • Just because auto insurance is mandatory does not mean that all drivers will comply with the law. Uninsured or underinsured motorist insurance can protect you in the event you are in an auto accident caused by a driver without insurance

The requirement to maintain auto insurance coverage is mandatory in almost every state in the U.S. While Massachusetts was the first state to require auto liability insurance in 1927, many other states have followed in its footsteps.

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Mandatory Insurance Requirements

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Even though almost every state, including D.C., requires drivers to carry a minimum level of auto liability insurance, the minimum coverage amounts vary by state. In addition to having to carry the minimum coverage amounts, many states also require physical proof of insurance. This is typically an insurance card that is issued by your auto insurance company and should be kept in your wallet or vehicle at all times.

Under your basic auto liability policy, the designated driver or the policyholder will be covered for damage caused by him in an auto accident related to bodily injury or property damage. For example, if you are at fault for a car accident, your auto liability policy would cover the damage you cause to another vehicle and the surrounding property, such as a lamp post or traffic sign.

It is important to keep in mind that you are only covered under a basic auto liability policy up to the limits of your policy. For damages that exceed the policy limits, the other driver in the accident may choose to sue you to recover from your personal assets to make up the difference.

One of the first things you should ask an auto insurance agent when shopping around for coverage options is what the state law is for coverage in your specific state. At the very least, you need to make sure that you meet this requirement and retain certified proof of insurance in the event you are involved in an auto accident or pulled over by a law enforcement officer.

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Penalties for Not Complying with State Laws

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It is never a good idea to drive without insurance coverage. All states want to encourage drivers to comply with the insurance requirements, so they have generally adopted steep penalties for drivers who fail to comply.

In many states, there are compulsory fines for drivers who fail to maintain insurance. They can be as high as $5,000, and they increase for each subsequent offense. You may also have your driver’s license suspended or revoked and can even face jail time in some states. Additionally, your license plates could be confiscated, and your car could be impounded, which is another expense.

Many states require that auto insurance companies submit insurance coverage verification for registered drivers in that state. If your auto insurance policy is canceled or not renewed, the auto insurance company may be required under state law to provide an update to the state motor vehicles department.

Drivers will be required to obtain alternate coverage or will face stiff penalties for failing to maintain required auto insurance coverage.

If you fail to pay your premium payments and your policy is canceled by your insurer, this may result in you having to pay higher premiums when seeking insurance from another insurance company. If the insurance company simply decides not to renew your policy for an additional term, then this may not necessarily affect your rates from another insurance company.

Why Optional Auto Insurance Coverage May be a Good Idea

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According to the Insurance Information Institute, more than 70 percent of drivers purchase comprehensive and/or collision coverage in addition to the required auto liability insurance.

The reason that the majority of insured drivers opt to purchase additional coverage is that the liability limits under each states’ laws are generally very low. This means that in the event you are responsible for a car accident, it is likely that you would have to pay out of pocket if you only maintained the standard auto liability coverage.

Under your basic auto liability policy, the designated driver or the policyholder will be covered for damage caused by him in an auto accident related to bodily injury or property damage. For example, if you are at fault for a car accident, your auto liability policy would cover the damage you cause to another vehicle and the surrounding property, such as a lamp post or traffic sign.

Collision coverage is a popular optional coverage for many drivers because it pays for damage to your car from a collision, even if you were at fault for the collision. You may have to pay a deductible for collision coverage, and the general rule is that the higher the deductible you pay, the lower your premium for this policy.

Comprehensive coverage is another good option for drivers because it pays for damage or loss to your vehicle from incidents other than a collision. For example, if your car was struck by a falling object or severely damaged by weather, your comprehensive coverage could reimburse you for the damage. This optional coverage is also typically sold with a deductible.

Even though insurance is mandatory in almost every states, some drivers still choose to break the law. In the event that you are in an accident with an uninsured driver or a driver whose policy limits are not high enough to cover the damage caused, uninsured or underinsured motorist insurance can help you pay for the cost of repair.

The Bottom Line

The first state to make auto insurance mandatory in 1927 set off a wave of similar laws across the country. Auto insurance is now required for drivers in every state except New Hampshire for many policy reasons. The damages in an auto accident can be incredibly expensive, and failure to have adequate auto insurance coverage can result in you having to pay out of pocket for the damages.

Because damages in an accident accumulate quickly, it is best to carry more than the minimum car insurance required under state law. This protects your personal assets in the event that you are responsible for a car accident.

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