What is Car Insurance “financial responsibility” law?
Get Legal Help Today
Secured with SHA-256 Encryption
UPDATED: Jan 7, 2021
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.
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.