Basic Guide

• Virtually all states require you to have insurance on any vehicle you operate on a public roadway. The only exception as of April 2011 is New Hampshire. Wisconsin also used to allow drivers to forgo insurance, but the new insurance mandate took effect 2010.
  
  

State Variances

• Insurers divide auto coverage into two categories: bodily injury and property damage. Insurance companies express the amount of your coverage with three numbers, each divided by a slash. The first two numbers refer to your bodily injury coverage; the first indicates the maximum amount each person in the accident would get, while the second shows the total bodily injury allowed per accident. The third number indicates your property damage coverage. For instance, if you saw 20/60/10, this would mean each person could collect up to $20,000 in bodily injury, the total bodily injury payments allowed would be $60,000 and you would be covered for up to $20,000 in property damage.
  
  Although every state except Hampshire requires drivers to have insurance on their vehicles, every state has different minimum requirements in terms of how much bodily injury and property damage coverage you must carry. For this reason, understanding how to interpret insurance figures is very important. The local branch of your state's Department of Motor Vehicles or Department of Insurance can tell you the minimums for your jurisdiction.
  
  

Proof of Responsibility

• New Hampshire lets drivers forgo insurance because state laws still require all drivers to prove they can meet the financial responsibilities that may arise in the event of an accident. A surety bond is one option for showing your ability to meet financial requirements. A surety bond is similar to insurance in that a third party covers your costs, but you have to pay the third party back. Self-insurance is a particular type of bond where you put all the money you need upfront, similar to a savings account reserved for accident costs. You also can show you have enough money on hand to meet the minimum coverage requirements for your state.
  
  

Why Most States Require Insurance

• Insurance is required in most states because the majority of drivers most people are not in a financial position to cover costs on their own or repay a third party. Legislators enacted vehicle insurance requirements because they recognized that anyone involved in an auto accident could be financially devastated if insurance weren't applied. They also enacted the legislation because insurance minimizes the number of lawsuits brought into court because of accidents.