Car Insurance is NOT Required

I’ve seen a lot of talk on twitter today about the parallels of requiring health insurance and auto insurance. I feel that it’s time to remind, or notify, everybody that car insurance is not mandatory, in most states.

What is mandatory, is that if you’re going to drive, you have to be able to pay for the damage that you potentially might cause if you’re at fault in an accident. This is called maintaining Financial Responsibility (FR). Now, given that auto insurance is regulated on the state level, each state will vary a bit on their requirements for FR.

Generally, buying a car insurance policy is the easiest way to satisfy the FR laws. I deal with insurance in most states. Ohio’s FR laws are fairly transferrable from one state to the next. Here’s an easy to read excerpt from the Ohio FR law:


“To comply with the FR requirements, individuals must maintain insurance or get a bond.”



You may be asking yourself, “so what’s a bond?” A bond is essentially an insurance product. It’s a promise to pay if something happens. However, you don’t necessarily have to pay for a bond.

Since the state doesn’t require insurance, they just require you to be able to pay for an accident you may cause. If you have $30,000 in the bank, the state will allow you to drive without insurance, because if you cause an accident you’ll be able to foot the bill. Also, if you have $60,000 in real estate equity, you’re good to go too. If you cause an accident you’ll be able to either sell the property or access a line of credit to pay for the accident.

Now, people with $30,000 in the bank or $60,000 in real estate equity know that they want to protect that asset. If they cause an accident they don’t want to be left with nothing. So most people in that situation buy insurance anyway. They do this because they know, that relatively speaking, the small cost of insurance far outweighs the benefits provided by the insurance company. Even, the smallest car insurance policy in Ohio provides $32,500 worth of benefits. And Ohio has some of the smallest coverage requirements in the country. Most states’ insurance policies have a minimum amount of benefits at $75,000.

If you want to talk FR requirements or what exactly your auto insurance does for you, please contact me.