Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jan 7, 2021

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A financial responsibility law requires you to prove you have enough money saved to pay for damages resulting from a car accident. States with this type of law may not require that you have insurance or other proof of financial responsibility at the time of vehicle registration.

However, failure to demonstrate the required level of financial responsibility at the time of an accident or traffic violation can result in suspension of your driver’s license or revocation of your vehicle registration. All parties involved in an accident must show the necessary proof or face the penalties imposed by the law for your state. Maintaining an automobile insurance policy is the most common way to comply with a financial responsibility law.

What satisfies financial responsibility laws?

Although most states require drivers to purchase car insurance, those that do not require you satisfy their state’s financial responsibility laws by other means. In some states, drivers can comply with the law by surety bond or real estate bond while other states required a certain amount of assets set aside to cover a car accident. Some larger companies or corporation can also show proof that they can satisfy the financial responsibility law by self insuring instead of buying commercial car insurance for their company vehicles. Those states allowing proof of insurance as a form of compliance to their financial responsibility laws are normally satisfied with an insurance card issued by your insurance company at the time vehicle registration.

Although there may be several ways to comply, the best way to comply with any states’ financial responsibility law is by purchasing car insurance. Car insurance not only provides financial protection for you when you are in an accident, but also gives help with covering court costs related your accident and covering the cost of an attorney.