When did it become a requirement to have auto insurance coverage? Why is car insurance required by law? Read on to learn about the first auto insurance policy, the first auto insurance requirements, and today’s car insurance laws. Also, be sure to enter your zip in on the side of this page to get a free car insurance comparison!
The first car insurance policy came into existence on February 1, 1898, courtesy of the Travelers Insurance Company. It was sold to Dr. Truman J. Martin of Buffalo, NY, as a way to protect the gentleman’s finances in the case of an accident with a horse (there were approximately 18 million equines in the United States at that time) rather than an accident with another vehicle (there only were about 4,000 of these new-fangled contraptions). The policy cost $12.25, giving Dr. Martin liability coverage up to $5,000.
Since the turn of the century, the predominance of horses has given way to domination by car. The implications of this new breed of automobile were enormous as more people purchased them and more people got into car accidents. More people were injured. More people died. Lawmakers in Massachusetts mandated liability insurance in 1927, starting a trend that swept through most of the United States by the early 1950s. Insurance became a way of life for a vast majority of Americans.
What are Today’s Car Insurance Requirements?
Most states require minimum liability insurance coverage. The ones that don’t are New Hampshire, South Carolina, Tennessee, Virginia and Wisconsin. This short list will get even shorter as of June 1, 2010, when Wisconsin joins the majority of states that require liability insurance.
While these five (soon to be four) states don’t dictate certain levels of liability coverage, they do address the issue in their statutes. Tennessee requires proof of financial responsibility, meaning that residents must furnish proof of a) car insurance or b) the ability to pay for damages in the event of an accident. South Carolina and Virginia assess a fee to those who register as uninsured drivers with the Department of Motor Vehicles. New Hampshire requires uninsured motorist coverage in all cases and will require liability insurance in certain situations.
Liability car insurance does not cover the driver or the car. Instead, it covers bodily or vehicular damage to the other party or parties in the event of a crash. An important factor when it comes to liability coverage is the “liability limit.” That is the maximum amount the insurance provider will pay out for an accident. If the damage exceeds the amount covered by the policy, it is the individual, and not the insurance company, that may be sued for the remainder. While many states stipulate bare bones limits in the $20,000 to $25,000 range, this may not be enough to protect the lifestyle and even the livelihood of the insured in the event of a lawsuit.
What Happens if you Don’t Have Required Car Insurance?
The penalties for driving without car insurance—or, in the above cases, proof of financial responsibility—vary across the United States, ranging from a fine of $500 all the way up to months in jail. The middle ground holds possibilities such as impounding and a suspended license.
The agency governing motor vehicles in each state provides its residents with all the details related to minimum levels of required car insurance as well as the penalty for not having it. Some states will give first time offenders a slap on the wrist (albeit an expensive one) while others reserve the right to suspend a driver’s license upon his or her first conviction for driving without car insurance.
One example of a state that assesses a high penalty for insurance violations is Delaware. A conviction for driving without liability car insurance of at least 15/30/5 (that’s $15,000 in bodily injury liability per person, $30,000 in bodily injury liability per accident, and $5,000 in property damage liability) will meet with a fine as high as $1,500 for the first offense and $3,000 for each new conviction within three years. A driving suspension of 6 months is also enforced.
How do I Save Money on Required Car Insurance?
Dr. Truman J. Martin’s inaugural car insurance policy back in 1898 would have cost him $316.25 in today’s dollars. Yet the average policy now costs $821. You can come closer to the ideal such inexpensive insurance premiums if you do your research.
One technology that has exploded even faster than the price of car insurance is the Internet, and you can use it to your advantage. Online car insurance quote comparison tools make it easy to generate quotes, based on your specific situation and needs, from many different insurers. The information is presented in a clear and comprehensive manner that shows you just how the insurers stack up against each other.
Use our free tool be entering your zip in and comparing quotes today!