Minimum Standards

Most states require at least a minimum amount of liability coverage to pay for vehicle damages and injuries to the other party if a driver causes a wreck. This liability insurance covers the cost of medical expenses and property damage to other persons in case of a vehicle accident, but it usually does not cover the driver’s own losses. In case of even a minor accident, the police will check to see that all drivers involved are covered by insurance (or, in a very few states, a surety bond or self-insurance policy as a substitute). Police can also request proof of car insurance at vehicle checkpoints.

Proof of Insurance Requirements

Lenders require proof of insurance on financed cars. Often, lender requirements are higher than the states’ minimum liability coverage requirements. The lender will likely require comprehensive and collision coverage to protect the value of their investment in the vehicle in case it goes into repossession.

If the insurance policy lapses for any reason, the lender can force coverage by obtaining a policy on their own and charging the borrower for the cost. These policies are typically much more expensive than a regular insurance policy and they protect only the bank’s interest, not the interests of the driver. Forced coverage does not provide any liability insurance. If the lender forces coverage on your vehicle, the best thing to do is purchase a standard insurance policy as soon as possible and show the lender proof of coverage.

What if an Accident Happens?

If you are in an accident while driving without insurance, you can be liable for all the other party’s medical expenses. You will also be responsible for paying the costs to repair or replace the damaged vehicle. In addition, you may be charged with violating state motor vehicle laws, resulting in fines, court-ordered community service, or suspension of driving privileges.

Fines for driving without insurance can range from $500 to upwards of $5,000 depending on the state. In states with a punitive point system, 3 points or more may be added to a driver’s record for failing to have insurance. Some states even impose jail time of up to a year for driving with no insurance coverage.

Because car insurance companies run background and driving record checks on applicants, and since driving without a license is a violation of motor vehicle laws, which can add “points” to a driver’s record, being found guilty of driving without insurance can make it harder to obtain affordable car insurance in the future. Lapses in coverage may raise motor vehicle insurance premiums considerably or even disqualify a driver from obtaining a policy.

Don’t just go to the first insurance agent that you find and take the first quote that you’re offered. Shop around, ask questions, and see what kinds of things each company or policy can offer you. One might cost a bit more but give you great coverage. Another one might be lower priced but not offer you what you need.

You can also save money by avoiding add-ons like rental car coverage. Most people don’t need these extras, and they all cost money every month. Even when you know you’re high risk, be upfront about it with the insurance company you’re getting a quote from. Ask them if they insure high risk drivers, what their criteria are, and what kind of rates they have. Depending on what qualifies you as high risk, you might have that status with one company and not with another, so it’s worth checking around to make sure that you’re getting the lowest rate for the best coverage.

If you borrow your friend’s car once a month than you are most likely covered. The policy is probably written allowing the insured to give permission to a relative or other driver. However, what if you borrow the car for longer than a day or two? If this is the case, you would be considered a regular user and your friend would need to add you to their policy.

Lastly, make sure if you do borrow your friend’s car you are not using it for business reasons if they have a personal policy. If something happens, the insurance company will not cover you.

If you are not covered, you could risk having to be responsible for a large amount of money that you do not have. This is why the state mandates that everyone have insurance. Having insurance is a simple precaution that will eliminate dealing with extra trouble than an accident already causes.

After all, if you got in an accident, the last thing you want to be worried about it is how you are going to pay for it. Instead, you should be worrying about whether or not you are going to be ok. So, keep your insurance current.