Driving Without Insurance: Is It Legal?

If you drive a car, truck, or motorcycle, you must demonstrate financial responsibility for accidents that cause property damage and bodily injury. In most states, the Department of Motor Vehicles (DMV) requires proof of financial responsibility with proof of auto insurance.

Every state determines its own minimum insurance requirements, which you must meet or exceed. If you don’t, you are in violation of the state laws. Many states impose financial penalties and can also suspend your license or car registration if you don’t have insurance.

Most states have requirements for both property damage and bodily injury liability coverage. However, there are two states with only property damage limits: Florida and New Jersey. Neither of these states require drivers to maintain bodily injury coverage.

There are also only two states that don’t require auto insurance: Virginia and New Hampshire. Virginia allows drivers who don’t want insurance to pay a $500 uninsured motor vehicle fee, which is different from uninsured motorist coverage.¹ The driver is legally allowed to drive an uninsured vehicle after paying this fee. There are no mandatory insurance laws for the state of New Hampshire unless you are in an at-fault uninsured accident; then you’ll be required to carry the insurance.²

In all other states, insurance is a requirement to be on the road. You won’t be able to register your car without insurance, and you can get a ticket if you are stopped without being covered.

In most instances, you insure the car, not the driver. The DMV requires the car’s insurance when you register the car; it’s not looking for a driver’s liability policy. While the main driver is often listed on the policy for rating purposes, others can drive the insured car and meet the insurance requirements. This means that someone who doesn’t have insurance can drive the car and, if they are in an accident, have the insurance pay the claim up to the policy limits.

Let’s look at how insurance stays with the insured car and the instances where it follows the driver instead of the car.

Permissive Use

Permissive use coverage is one way auto insurance works for you. When an insured car’s owner gives someone else permission to drive the car, this is permissive use. Because the insurance follows the car, someone with permissive use doesn’t need to have their own insurance to drive the car legally.

However, having their own insurance can increase coverage if they have higher limits than the car’s limits. In fact, some insurance carriers drop coverage to state minimum requirements in permissive use cases. If there is an accident, the first line of coverage is the car’s, but if that isn’t enough, the driver’s other policy could kick in.

Without insurance, both the driver and the car owner could be held liable for damages and injuries. The injured party would sue them directly to try to cover the losses.

Renting a Car

Rental car companies often want to make sure that you have rental car coverage. While you aren’t required to get theirs (or even have your own), you need to understand that you’ll be responsible for damages if you have an accident. Using your existing auto insurance policy with you as a named insured provides complete protection. This way, you don’t need to pay for the rental company’s coverage.

If you are pulled over and don’t have insurance while driving a car, you will get a ticket and a fine. The fine will depend on whether this is your first offense as well as the state you’re in. Failure to have insurance is also a misdemeanor crime with jail time up to five years in places like Connecticut.

Penalties for Not Having Insurance

Liable for Total Amount of AccidentThe state penalties are just the tip of the iceberg when it comes to the costs of being uninsured. When you don’t have insurance, you are 100 percent liable for the property damage and injuries of those you have hit with a car. You are also liable for 100 percent of your own car’s damage and any injuries you may have caused among you and your passengers.For example, Pete is driving a car that has a lapsed insurance policy. He is an uninsured motorist. He hits another car that has three passengers. The other party’s car sustains $20,000 in damages, and one person is taken to the hospital with $40,000 in medical expenses. Pete is responsible for all of those costs, including the damages to his car.If Pete doesn’t have the money to pay those damages, the injured party can sue him. A judgment against him could garnish his wages for up to 20 years in some states. That period of time is also renewable. So this one accident could cost Pete part of his income for decades to come until it is paid off.To avoid this situation, we recommend having the right insurance policy in place.

If you don’t have car insurance, you’ll want to shop around for the best insurance for your needs. This might be a policy for your car or a non-owner policy that protects you while you drive other people’s cars. When you’re shopping for insurance, check the minimum liability requirements in your state in this auto insurance guide and make sure you meet them. Consider getting higher than the minimum liability limits to protect yourself further.

Remember that your insurance policy will only cover up to the policy limits. You are still liable for damages over and above the policy limits. This is why you may want a policy with higher limits. In a bad accident, you could still get sued for the difference between what the liability policy will pay and what the actual damages and injuries are.

Most car leases also have a minimum requirement for insurance. This is often 100/300/50, which means coverage of $100,000 per person in the accident with a cap of $300,000 for injuries and $50,000 for property damage.

Insurance companies aren’t all created equal, so if you can’t afford one company’s rates, check with others. Shop around for auto insurance to see how you can get a policy. Make sure you are getting all possible auto insurance discounts on the policy as well.

There is also a new market emerging with usage-based insurance that makes it much more affordable to get insurance. You pay for insurance only for the miles you drive, making it cheap insurance. This can help you meet the state minimum guidelines and protect you from liability.

Some states also have a low-cost insurance option run by a state agency. For example, California’s Low-Cost Auto Insurance Program offers reasonable rates for those who qualify.³ You must have a valid California driver’s license and a car valued at $25,000 or less. You must also meet the income requirement, which is $32,200 or less for one person but scales up for families of two or more. Ask your state’s Department of Insurance for resources if you can’t find an agent who can help get cheap coverage.

If you still can’t find insurance that you can afford, you may need to park the car until you can afford it. Insurance is a legal requirement that you can’t get around in 48 of the 50 states.

Simply put, it is against the law to drive without insurance in most states. Sure, you can buy insurance to get the car off the lot or register it and then cancel the car insurance or let it expire, but you’d be breaking the law. You’re also assuming a lot of risks and financial responsibility when you don’t have insurance.

Think about it this way: Do you want to be responsible for $25,000 in medical bills for someone who is injured if you hit their car? That may seem like an exaggeration, but it happens every day. That’s a hospital stay with diagnostic tests and rehabilitation afterward.

The average personal injury settlement in auto accidents is $19,000. The fact is that you could be held liable for hundreds of thousands or more in medical claims. Then there’s the matter of fixing the cars. Even a minor fender bender can be thousands of dollars in damages with today’s cars.

To avoid this liability, you’ll want to have auto insurance. It’s a low-cost way to protect your wallet. Carrying at least the minimum liability coverage will keep you on the right side of the law.

While you are technically still responsible for costs above the liability limits, most accident attorneys will take what the insurance gives them and move on. However, if the attorney senses that you have deep pockets, they will file a lawsuit for more than what the insurance pays.

Shop for insurance by getting a quote from several carriers. Get an idea of the type of coverage you want and make sure to compare apples to apples.

For example, get a quote for 15/30/5 from several carriers so that you can assess who has the best price for the same coverage. Whatever liability limits and property coverage you choose, make sure the quotes match. That way, you’ll know you’re getting the best deal.