June 2, 2010

Knowing Your State Financial Responsibility Laws

Every state has its own laws for auto insurance and these laws will govern the type of coverage which is mandatory and other laws which define the minimum amounts that have to be covered under various heads. These laws define the financial responsibility that fall on the insurer for any injuries or damage caused during any accident. Financial responsibility laws require that you furnish proof of your ability to pay up in case of an accident. These proofs can be in the auto insurance coverage that is taken, and which has to provide for the minimum liability as per the laws pertaining to the state in which you are insured. Auto insurance quotes from auto insurance companies would normally cover such liability insurance. Coverage can be a minimum of $20,000 for individuals and up to $40,000 for all, which may include a $15,000 cover for property damage.

Most states require basic liability coverage by their laws and comprehensive and other coverage is optional. This basic coverage gets around the financial responsibility laws of the state. Penalties for violating the financial responsibility laws can even cause the loss of driving licenses and impounding of the vehicle. This proof of insurance has to be carried at all times and may require to be produced at any time. Most auto insurance companies would provide this proof in the form of cards that are easy to carry. Failure to carry such proof can make a driver liable to penalties and citations, which could reflect on the driving license. Once such citations are made, renewal of premiums could become a problem and insurers may ask for higher premiums.

Present laws in most states require compulsory auto insurance which covers the financial responsibility as well. In earlier times, financial responsibility had to be proved after an accident and could be in the form of an insurance coverage, depositing cash, bonds or stocks. Financial responsibility could also be proved by posting personal bonds to cover the liabilities. In most cases licenses remained suspended until proof of the financial responsibility was given to the authorities under whose jurisdiction the accident had taken place. Subsequently most states have made it mandatory to cover this financial liability in basic insurance coverage.

Knowing the financial responsibility laws of the state where you are using your vehicle becomes essential for any driver. This would indicate the minimum coverage that would be required in order to complete the statutory requirements. Allowing other persons to drive your vehicle does not absolve you of the financial responsibility in case of an accident to your vehicle. Financial responsibility has to be demonstrated by persons owning the vehicle. It’s worthwhile to shop around for different auto insurance quotes.