Which States Don’t Require Liability Auto Insurance – And Why?

Car insurance premiums are often the most expensive part of owning a vehicle. At the same time, having at least liability insurance is considered so vital that most states require it.

A liability insurance covers the other vehicle and passengers in case they cause an accident. Plus, there is usually a requirement for underinsured or non-insured drivers who cause an accident to occur and inflict damage and injury to your vehicle, yourself, and your passengers respectively.

Are there any states that don’t have regulations that require vehicle owners to buy minimum policies? If so, what do these states do instead to protect other people’s property?

Understanding The Basics Of Required Auto Insurance

Every state does require vehicle owners to be financially responsible for their car, and that includes having a way to settle claims for accidents. No matter where you live, you are still held responsible if you cause an accident.

In most states, the way they make sure that people can be financially responsible for the risk of being at-fault in a car accident is by having a minimum liability insurance policy. It is this kind of coverage that pays claims if you are judged to be the driver at fault in a wreck.

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States Without Required Car Insurance

Actually, there are only two U.S. states where some drivers may not have to carry liability insurance. These are New Hampshire and Virginia. Even though these two states may not require everybody to buy an auto policy, they still require state residents to be financially responsible for their cars. So, if you always wondered, do all states require mandatory car insurance, then you should get the answer already. Let’s dig deep.

New Hampshire

If you do or do not buy car insurance in New Hampshire, the law will still hold you responsible for damages that range up to $25,000 in property damages and $50,000 for total liability. If you cause an accident and can’t settle the claim, you could get your driver’s license and vehicle registration suspended.

Virginia

People who don’t want to buy auto insurance in Virginia may be able to pay the state $500 a year for a waiver. This fee doesn’t pay for any insurance, and you can still be held legally responsible for damages for any accidents that you cause.

Do Drivers In New Hampshire And Virginia Usually Buy Coverage?

It’s interesting to note that drivers in both of these states typically buy liability insurance even though it isn’t technically required. Most drivers find that paying premiums is an affordable way to prevent getting sued for damages or injuries caused by a car accident.

It’s even more interesting to look at some statistics to see that drivers in these two states are even more likely to buy coverage than the national average.

For example…

The U.S. average for uninsured motorists is almost 13 percent. In New Hampshire, only about nine percent of drivers lack coverage. In Virginia, about 10 percent of drivers don’t buy coverage. Obviously, the lack of rules that force all drivers to purchase liability policies doesn’t keep prudent vehicle owners from making sure that they cover their cars.

States Which Allow Alternatives To Car Insurance Policies

About 30 states will allow vehicle owners to buy bonds instead of car insurance.

Some of the larger states that allow this auto insurance alternative include California, Texas, and New York. You can contact your own state’s department of motor vehicles to find out if this option is available where you live.

Basically, this works by having the driver buy a bond. The purchaser’s credit score will have an impact on the cost of this bond. If there is an accident, the purchased bond will pay for the damages. After that, the bondholder has to pay the bond back for damages.

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Accident Bonds Vs. Car Insurance

Bonds won’t get you out of paying for damages. Instead, they work more like a loan that you must repay with interest to settle claims for any accidents that you cause. When you buy car insurance, it is usually attached to a specific car.

For instance, you can lend your car to your neighbor, and your auto insurance will still cover a licensed driver who has your permission to drive. If the other driver lives in your household, they do need to be covered under your policy, so this doesn’t apply. These bonds follow the driver so you can use them for any car that you plan to drive.

You Take A Gamble When You Don’t Have Auto Insurance

Any time that you drive without auto insurance coverage, you take a pretty large risk. If your state allows you to have a car insurance alternative or not, you will still be responsible for the damages. Also, your auto insurance company will even help defend you in case another party claims that they had more damages than they really did.

Look,

In states that do require auto insurance, you may need proof of coverage to renew your registration and license, and you will certainly need it if you’re involved in any kind of accident. Most drivers do choose to purchase liability insurance for peace of mind and to demonstrate financial responsibility.

The Future of No Mandatory Car Insurance

Currently, there is no serious movement to change the laws in New Hampshire and Virginia when it comes to making car insurance mandatory. Conversely, there does not appear to be any widespread movement to remove the necessary requirements for car insurance in the other states and District of Columbia.

This means for residents of states that don’t require car insurance; the best advice is that they carry enough cash-on-hand or bond to ensure that if they do cause an accident, they can pay for the damages and injuries incurred.

However, they also have the option to purchase car insurance on their own which can also pay for the damages.

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