Ways of Complying with the Financial Responsibility Law

All states in the U.S. require drivers to carry proof of financial responsibility, that is, proof that they are capable of compensating anyone they might injure in a motor vehicle accident wherein they are at fault. This financial responsibility may be shown by:

  • Carrying auto liability insurance, which is the requirement in 48 states
  • Paying the state’s Department of Motor Vehicles (DMV) the required uninsured motor vehicle fee if they decide to register their vehicle as uninsured (paying this fee in lieu of purchasing an automobile liability insurance policy, obtaining a self-insurance certification, depositing money or securities, or securing a surety bond is a practice allowed in the state of Virginia; in the event of an accident, the at-fault driver would be held personally liable in compensating the person that he or she injures)
  • Depositing securities or money with the state treasurer or filing an SR-22 (these are alternatives to purchasing an auto insurance policy, a practice allowed in the state of New Hampshire).

The purpose of financial responsibility, or liability coverage, is to compensate an accident victim for the bodily injuries that he or she has been made to suffer and for all other costs or losses resulting from the injuries.

In the 48 states where carrying auto liability insurance is required, the type of insurance coverage that drivers need to carry depends on the “liability” system recognized in the state where they reside. In states where the “fault” system is recognized (also called “at-fault” or “tort liability” system), the tort insurance coverage is what drivers will need to purchase.

Under the “fault” system, accident victims can get compensation from their own insurance provider or from the at-fault driver’s insurance company; the victim may also decide to file a civil lawsuit against the at-fault driver. Compensation to be paid to the victim will cover cost of medical treatment, loss of income, pain and suffering, and damage to property.

In “no-fault” states, accident victims can recover financial losses from their own insurance providers, regardless of whose fault the accident is. Two major advantages this system has over the “fault” system is that, one, the victim will no longer have to file a lawsuit just to seek compensation (from the at-fault driver) and, two, seeking compensation will also no longer be a problem for: victims of hit-and-run; those whose are hit by a driver in a stolen vehicle; or those who are hit by a driver who is either uninsured or underinsured.

Despite the mandate on carrying liability insurance, millions of drivers rather choose to be uninsured – one reason is the high cost of premiums. The website of Hankey Law Office, P.C., however, tells drivers that being uninsured can be much more costly, thus, it is important that auto insurance be made affordable to everyone. Though there may be hundreds of insurance firms that never stop in finding ways to make premiums expensive, drivers and car owners can always turn to independent car insurance companies for help in finding the best insurance deal and the specific firm that offers this deal.

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