Is it illegal to have a car without insurance?

Car insurance is almost always required by law, but there are exceptions. Learn how to own a car properly and research your state laws on car insurance.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

UPDATED: Jun 10, 2022

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Here's what you need to know...

  • In almost all states, you need car insurance or at least a way to pay for damages
  • There are exceptions, such as if you drive in New Hampshire or you don’t need to register your vehicle
  • Uninsured drivers can face strict penalties if caught

You are legally required to have car insurance in many states, or at the very least a way to pay for damages, such as with assets. There are notable exemptions, but it’s generally illegal to drive without insurance.

Insurance laws vary from state to state, so be aware of your own state’s laws if you want to stay protected and legally in the right. This is the good start on learning how to own a car.

Is it illegal to have a car without insurance?

Generally, yes. Car insurance is inherently different from other types of insurance in that it not only protects you but also the other party in the event of an accident.

Think about the difference between car insurance and home insurance and you’ll understand why the former is necessary. Home insurance applies to you and you alone if something happens. You’ll never have to pay someone else. Car insurance goes both ways, applying to both you and others. If you’re involved in a car accident, your or the other driver’s insurance company pays out.

Consider what’s on the line in a car accident claim if it’s your fault. In addition to property damage, you may be responsible for expensive medical bills. This could add up to tens of thousands of dollars, sometimes more. The financial cost to you could be devastating, and you might be unable to pay the damages for the other party. That’s why your car insurance company pays instead.

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When can you have a car without insurance?

There are several scenarios in which you don’t legally need car insurance. Two states, New Hampshire and Virginia, do not require car insurance. This means you would personally be responsible if an accident was your fault, and you may be legally liable for all expenses involved. In Virginia, there is a $500 annual fee for driving uninsured.

You don’t need insurance for a car that you don’t drive, such as if the vehicle is always kept in a garage and doesn’t require license plates or registration.

A car kept in storage doesn’t necessarily mean it’s never going to suffer damage, however. You might be the victim of vandalism or theft. Comprehensive car insurance is the best option for this case. Thus, you have the option of getting insurance even if the vehicle isn’t driven.

What’s the difference between mandatory insurance laws and financial responsibility laws?

Most states have one of two types of insurance laws in place. Mandatory insurance laws mean that the state requires you to buy insurance, whereas financial responsibility laws mean you must be able to pay for any damages as a consequence of an accident. With the latter, as long as you have the resources to pay for damages, you are sufficiently covered. However, this means you may possibly have to pay for damages with assets such as your house or car. While this can be an alternative to paying car insurance rates, it is extremely risky to opt for this.

What sort of penalties are there for driving without insurance?

If you’re caught driving without insurance, you can expect the law to penalize you. The penalties can come in several forms:

  • Fines
  • Points on your license
  • Jail time
  • License, registration, and/or plate suspension
  • Court fees
  • Impounding fees

In addition, a court may require you to file an SR-22 form, which would label you as a high-risk driver and could drastically increase your car insurance rates.

You may also be unable to collect any damages if you don’t have car insurance, even if the accident wasn’t your fault.

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What is uninsured motorist coverage?

This type of coverage protects you if you’re hit by an uninsured driver. There are two subtypes of uninsured motorist coverage: uninsured motorist bodily injury coverage and uninsured motorist property damage coverage.

UMBI takes care of things like lost wages and medical bills as a result of an injury sustained in a vehicle accident. UMPD covers your vehicle and sometimes your home.

What about underinsured motorist coverage?

Underinsured motorist coverage isn’t quite the same thing as uninsured motorist coverage. The former is for when the other driver is insured but doesn’t have a policy that is high enough to cover your damages. This coverage also has bodily injury and property damage subtypes.

Underinsured coverage can be useful if, for example, the other driver’s policy limit is $50,000 but your damages are $75,000. In this case, your insurance will cover the remaining $25,000.

States may require either uninsured or underinsured motorist coverage or both.

How much does uninsured motorist coverage cost?

Uninsured motorist coverage typically costs about 5% of your yearly insurance rate. If your annual rate is $1,300 a year, this extra coverage will probably cost about $6 a month. However, this can vary depending on your age and driving experience, as well as by state.

Deductibles usually apply to uninsured motorist coverage, and you must be able to pay your car insurance deductible. If you can’t pay your deductible, your insurance company might waive it, or you’ll need to apply for a loan.

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What if I’m hit by an uninsured driver?

It depends on whether your state has no-fault or at-fault policies. In a no-fault state, your insurance company will pay for your damages if you’re hit by an uninsured driver. In an at-fault state, the party responsible for the accident must pay the damages. No-fault car insurance and personal injury protection are synonymous.

Most of the time, your insurance rates will not go up as a result of an accident that wasn’t your fault. In some states, it’s illegal for an insurance company to do this. However, this doesn’t apply to all states or all scenarios.

Final Thoughts on How to own a car and Whether You Need Car Insurance

Most of the time, the law requires you to have car insurance. If you don’t need to buy a policy outright, you at least need a way to pay for damages as a consequence of an accident, if not with money, then with assets. However, there are exceptions, such as if you live in New Hampshire or your vehicle doesn’t legally need to be registered. Be aware of the legal requirements in your state.

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