Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 29, 2020

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Here's what you need to know...

  • When you purchase a new vehicle or you move to a new state, you are obligated to register your vehicle
  • Some states have mandatory auto insurance laws and others have compulsory or financial responsibility laws
  • It is your responsibility to find out what is required in your state before you buy coverage from a licensed insurer
  • Failing to comply with the obligations that you take on when you become a vehicle owner can lead to a lot of hassle and a lot of expenses.

When you purchase a new vehicle or you move to a new state, you are obligated to register your vehicle with the local Department of Motor Vehicles within 14 to 30 days.

The entire purpose of a vehicle registration is to establish ownership and also to identify the party who is responsible for paying taxes and fines when there are parking or toll infractions.

When a vehicle is being operated on public roadways or parked on public streets, it must be registered.

In order to maintain the registration and avoid a suspension, the vehicle owner must comply with the state’s vehicle code.

Part of the vehicle code states that owners must purchase and maintain a minimum amount of liability insurance to comply with the mandatory insurance laws.

While insurance is a requirement either directly or indirectly in most states, you may not be required to present proof of your insurance when you are registering your vehicle or renewing your current plates.

Just because many states no longer require you to present an auto insurance ID card or an insurance declarations page to prove you have coverage does not mean that you do not need to purchase coverage.

Failing to have an active policy in place when your vehicle is registered can lead to civil fines, criminal penalties, and fees.

Table of Contents

What are the car insurance requirements for private passenger vehicles?

Some states have mandatory auto insurance laws and others have compulsory or financial responsibility laws.

While state officials in states with financial responsibility laws do allow vehicle owners the option to self-insure instead of buying an auto insurance policy, the average vehicle owner cannot afford to deposit thousands of dollars with state officials to prove that they can afford to pay claims.

While the requirements and laws vary from state to state, most people who own private passenger cars will choose to carry insurance to comply with the law even when there is an option.

If there are mandatory requirements, typically the state will only mandate the owner carries liability that will pay for third-party damages.

This requirement is in place to protect others from suffering financial damages and to protect your finances if you are negligent.

It is your responsibility to find out what is required in your state before you buy coverage from a licensed insurer.

It is important to remember that having the minimum limits of liability will satisfy the requirements so that you can legally drive and legally satisfy your obligations as the registered owner, but that does not necessarily mean that you are adequately protected.

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How does liability insurance protect you?

Not only do you need to understand the laws and codes surrounding vehicle insurance and registration, you also should know how the coverage that you are obligated to carry will protect you.

Liability insurance will pay for damages to a third-party and not to you or your household members.

If you are involved in a collision and it is determined that you were over 50% at fault for the damages or the injuries, you must pay the medical bills and the repair bills that are a result of the loss.

This is why liability insurance consists of:

  • Bodily Injury Liability: pays for reasonable third-party medical bills
  • Property Damage Liability: pays for reasonable third-party repairs

Instead of being obligated to pay thousands of dollars to pay for the other party’s new fender or paint job, you can file your claim and the insurer will pay.

There are no deductibles for liability claims, but it is possible that your rates can go up if you are at fault.

This is because you are considered a higher risk driver.

What happens if you do not comply with insurance laws?

Failing to comply with the obligations that you take on when you become a vehicle owner can lead to a lot of hassle and a lot of expenses.

Since registered owners of vehicles are the parties who are responsible for buying insurance and maintaining it, you will be assessed some serious penalties if you fail to comply with the law.

Penalties include:

  • Fines for violations
  • Court fees
  • Order to file an SR-22
  • Loss of a job for criminal conviction

It is possible that you can lose your driving privilege, your vehicle registration or even your freedom if you are convicted of driving without insurance.

Many do not know this, but it is possible to be penalized without even being caught behind the wheel when your insurance is expired.

How does the state know that you have insurance?

You might be wondering just how the state will know you do not have insurance when you do not have to report your policy number or provide documentation when you register the car.

What you might be surprised to learn is that many states now have an electronic verification program in place that requires insurers to notify the Department of Motor Vehicles (DMV) when policies are issued or inactive.

These are the new programs that make it possible to register a car without proof of insurance.

They are also the new programs that make it possible for the DMV to find out exactly when your policy cancels.

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How does an electronic verification system work?

DMV’s and insurance companies have access to a special electronic monitoring system.

The DMV can see which vehicles are insured and what the policy number and effective dates are.

The insurance company must report the policy number and attach it to a VIN.

Anytime the policy cancels because of non-payment, nonrenewal, or insured request, an electronic notification is sent.

This type of system was put in place to combat uninsured drivers and to penalize those who feel like they can violate the law.

Now, an officer can access vehicle database information and see if a car is insured without making a phone call or without asking for ID cards.

If you are tempted to drive on public roads without insurance, think again.

Many states are buckling down on drivers who do not have insurance.

These states are making the fines bigger and the penalties stiffer.

If you do not have insurance, now is the time to comparison shop.

Once you find the best value, make a payment and your insurance status will be reported to the DMV.

Start comparing car insurance rates now by entering your zip code in our FREE tool below!

References:

  1. http://www.360financialliteracy.org/Topics/Insurance/Cars-and-Auto-Insurance/State-by-State-Minimum-Coverage-Requirements
  2. www.fhwa.dot.gov/trafficinfo/
  3. http://blog.motorists.org/vehicle-code-by-state/
  4. http://personalinsure.about.com/cs/vehicleratings/a/blautominimum.htm
  5. http://www.iii.org/article/infographic-types-of-auto-coverage
  6. http://law.freeadvice.com/general_practice/traffic_law/driving-no-insurance.htm
  7. http://www.iii.org/issue-update/compulsory-auto-uninsured-motorists