If there’s one thing that makes understanding car insurance difficult, it’s state regulations that can be administered by insurance departments or motor vehicle departments. Making matters worse is the fact that the laws differ from one state to the next.
From the perspective of the driver, it is never a good idea to ignore state regulations. Doing so can land you in a boatload of trouble. Depending on your state, violating car insurance laws can result in:
- Hefty fines and penalties
- Suspended registration, plates, and license
- Expensive reinstatement fees
- Jail time in some cases.
Minimum Insurance Requirements
The most important thing you need to know is what your state requires at a minimum. With the exception of Iowa and Virginia, every other state requires drivers to somehow prove they have the financial means to cover an accident in order to legally drive a vehicle.
Some states allow drivers to cover that responsibility through cash deposits or surety bonds. Most accept only a liability insurance policy as proof of financial responsibility. Therefore, you need to know where your state draws the line on this. In all likelihood, you are going to be required to purchase insurance.
Along those same lines, every state requires car insurance policies to start with minimum amounts of liability. Liability insurance covers the injuries and damage you cause in an accident that is clearly your fault. Using Nebraska as an example, minimum liability amounts are:
- Bodily injury or death (single victim) – $25,000 per accident
- Bodily injury or death (multiple victims) – $50,000 per accident
- Property damage – $25,000 per accident.
Experts agree the minimum amounts are not nearly enough based on the current costs of healthcare and car repair/replacement. If you have assets you want to protect in the event of a lawsuit, you should consider raising your liability limits.
When Insurance Is Required
When insurance is required is another important thing to know. For example, the state of New York requires all drivers to have an insurance policy in place BEFORE a vehicle can be registered. Drivers must include an insurance ID card with a registration application.
Other states allow registrations to take place without insurance in force. In those cases, it is still illegal to drive without insurance, but insurance does not affect the registration of a vehicle.
There are a handful of states, like Arizona for example, that allow you to take a vehicle off the road and remove the insurance without having to surrender the registration and plates. In such a case, you’d have to fill out a form detailing your plans for the vehicle. You will not be able to legally drive the car again until you purchase at least a cheap car insurance policy.
SR-22 Insurance Requirements
Lastly, every state has some sort of regulation relating to what is known as the SR-22. The SR-22 is a legal instrument stating you have the financial resources to maintain proper car insurance. If you are required to maintain an SR-22, you will have to check with your state for the details.
Unfortunately, an SR-22 requirement is likely the result of allowing your insurance to lapse or being found guilty of a major violation like DUI/DWI. An SR-22 means you can forget about cheap car insurance for a while. You will be included in a high-risk pool until your SR-22 runs out.
Varying state laws can make car insurance a complicated business. So before you begin searching for an affordable car insurance policy, make sure you know the law in your state. If you are planning to move from one state to another, keep in mind things will be different. You will likely have to start over with new insurance.