With the exception of New Hampshire, all states in the US require drivers to carry proof of financial responsibility which is actually a proof of their capability to compensate an individual who they may injure or whose property they may damage in an accident wherein they are at fault. This financial responsibility may be shown by carrying auto liability insurance, by paying an uninsured motorists vehicle fee to their state’s to the Department of Motor Vehicles (as in the case of the state of Virginia if drivers wish to register their vehicle as uninsured), by depositing securities or money with the state treasurer (which is allowed in the state of New Hampshire), or by any other means allowed by the state. Financial responsibility, which is basically liability coverage, is designed to pay for another driver’s or person’s (the victim in the accident) bodily injury (BI), property damage (PD), and other costs or losses resulting from the injury.
The type of auto liability insurance that drivers need to carry varies among states; there are states which require the full tort insurance coverage and there are those that require the no-fault insurance coverage, which is also called Personal Injury Protection (PIP). The former, which is mandated in tort states, allows accident victims to bring legal charges against the at-fault driver to seek compensation that will cover cost of medical treatment, loss of income, damage to property, and pain and suffering. This compensation will be paid to the victim by the at-fault driver’s insurance provider. In no-fault states, however, it is the respective insurance providers of the drivers involved in the accident which will pay them the compensatory damages, regardless of whose fault the accident is. Besides eliminating the need for the victim to file a civil lawsuit against the at-fault driver, this system will also prove beneficial to the accident victim if the at-fault driver were either uninsured or underinsured, if the car used by the at-fault driver were stolen, or if the accident were a case of hit-and-run. No-fault insurance or PIP usually covers injuries suffered by the driver and his or her passenger/s, lost wages, medical and hospital expenses, and household-related services while the victim is recovering.
Besides mandating the carrying of auto liability insurance, some states also require drivers to have either the Uninsured Motorist Coverage, which is designed to pay for damages and losses caused by an uninsured motorist, or the Uninsured Motorist Coverage, which is supposed to supplement any insufficiency in the amount of compensation to be paid by the at-fault driver’s insurance provider.
Proof of insurance coverage is necessary whenever drivers renew their car registration or their driver’s license. What many drivers do is purchase a policy and then cancel it as soon as they have their car registered, thus ending up uninsured. The most common reason given by drivers as to why they would rather risk violating the law than maintain their insurance policy, which is actually financially wiser, is the high cost of premiums which, by the way, becomes more expensive if they have less driving experience or if they have past traffic violation records. According to Insure on the Spot, there is a way for drivers to get the best insurance deal without hurting their budget: by asking quotes from independent car insurance companies for coverage that is according to their needs, situation and budget. This means, regardless of a person’s driving history, driving experience, or the model of car he or she drives, there is an insurance deal that he or she will be able to afford.