Do you have to have auto insurance in America?

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Do you have to have auto insurance in America?

There are a few things that this country is known for: apple pie, bald eagles, and mandatory auto insurance requirements.

Just kidding – a lot of other countries have compulsory car insurance policies. The United Kingdom was actually the first country to come up with minimum auto insurance requirements way back in 1930, with the Road Traffic Act. This law required that vehicle owners and drivers buy insurance to cover the cost of injury and death to third parties in the event of a car accident. Germany followed up with their own legislation in 1939, with several other European countries following suit.

While you can technically say that you need auto insurance in America, there’s actually no national law that requires it. Instead, each state gets to make up their own rules when it comes to auto insurance. And while forty-seven states have passed legislation that requires a minimum level of car insurance, there are three states that have slightly different rules.

In Virginia, you can pay $500 to drive without insurance (this fee is per vehicle, billed annually). This doesn’t mean you have insurance and this does not protect you financially if you get into an accident. You are still liable for damages in accidents that you caused.

Both New Hampshire and Mississippi allow you to post cash bonds instead of buying insurance. If you cause a car accident, the cash bond will cover bodily injury and property damages.

In all three of these states, if you choose to buy car insurance, there is a minimum amount that you need to purchase. You can read about that more in our article on the exact amount of car insurance you need in every state.

While Massachusetts and Connecticut created laws addressing the problem of financial responsibility of car accidents back around the same time the United Kingdom did, the rest of the states didn’t really get on board until the 1950s, when New York passed a compulsory insurance law.

To many Americans, compulsory auto insurance makes sense. Car accidents can cost everyone involved a lot of money, and it can be absolutely devastating financially to both parties. Insurance ensures that everyone involved is covered, no matter what their own financial situation is.

However, some organizations, such as the National Association of Independent Insurers, oppose compulsory auto insurance. Many argue that compulsory auto insurance is an undue burden on the poor. You won’t find a lot information about it – the last public statements I can find came back in 1991.

One alternative that these insurers provide is cents-per-mile pricing. Basically, you’d pay for insurance based on how much you drove your car, not a flat fee based on external factors. In 1991, that kind of insurance wasn’t really possible because it was just too easy to tamper with odometers. Now, however, with app-connected dongles, insurance companies like Metromile can accurately track how far you’ve driven your car. While this type of insurance isn’t available in every state, it is interesting to see how many of these concerns from twenty-five years ago are finally being addressed thanks to technology.

At the end of the day, if you live in the United States, you probably want to buy auto insurance. Forty-seven times out of fifty, it’s mandatory, and even in the states where it’s not mandatory, it’s usually the best way to fulfil your liability requirements.

Image: Tim Lucas