Liability auto insurance is required in all states. Benefits are provided under a fault or no-fault system. Under the "fault" system, the insurance company pays benefits based on whose fault the accident was, whereas "no-fault", benefits are paid regardless of who is at fault for the incidence.
In both cases, states make sure that car owners and drivers have the required liability insurance by:
- Financial responsibility/security laws, or
- Compulsory insurance
Financial Responsibility/Security Laws
Ownership of motor vehicles became more popular in the early 1900's, but there was no insurance for them yet. As ownership became more widespread, some states realized the need to cover owners if someone was hit by a driver and they didn't have enough money or assets to recover costs. Who was supposed to pay the injured party's damages - especially medical bills?
This problem was initially solved through financial responsibility/security laws. These are still used today although the statutes have somewhat changed.
The basic idea is if a driver caused an accident resulting in an injury or death of another person, he was required to show proof of financial responsibility. That is, proof that the he could pay any judgment against him for damages to the other person or party. If the driver couldn't, his license could be suspended or revoked. Also, the driver would have to provide some type of security - financial or property - to guarantee payment to the injured person.
Over time, this became more and more difficult to administer, especially to determine what type of security was needed and why a driver's license could be revoked and for how long. These laws aren't widely used today for these reasons.
Other states developed compulsory insurance, which requires drivers to maintain certain insurance coverage on their vehicle. These laws require proof of insurance when the vehicle is registered or license plates are renewed. This usually applies to new and used cars.
Compulsory insurance specifies state minimum coverages as well as the necessity for certain types of coverage such as liability insurance.
Question Your Attorney
- I just bought a used car from my neighbor, who still has insurance on the car. Can I register the car under my name using that insurance?
- I'm responsible for a car accident and I only have fault insurance, what am I entitled to from my insurance company?
Related Resources on lawyers.comsm
- Automobile Accidents articles and information
- Personal Injury Basics articles and information
- Find an Automobile Accident Lawyer
- Selecting a Personal Injury Lawyer
- Visit our General Personal Injury, Insurance Claims or Auto Accident message boards for more help