Financial responsibility laws essentially say that when you are in an automobile accident or are convicted of a moving violation, you must show that you have assets on reserve are able to pay for any damages.
The purpose of this law is to be sure that if a person gets into an accident with another person, he or she can pay for the damage done to other individual's car and person if it is their fault.
Different states have various ways of proving financial responsibility, but the most common is whether a person has automobile liability insurance. Some states allow other methods of proof of financial responsibility, such as depositing cash or acceptable securities into a trust fund held by a state official, or posting a bond with the state.
When Do I Need to Prove Financial Responsibility?
There are many times where you have to prove financial responsibility:
- After you have been involved in a car accident
- When you are reinstating your driver’s license after it has been suspended
- When a police officer asks for it on a traffic stop
- When you register your car
- When leasing or purchasing a car with a auto loan
Usually you can prove financial responsibility by showing your insurance ID card and your coverage through the insurance carrier. In some states, drivers can obey with the financial responsibility laws by surety bond or real estate bond while other states require a evident amount of assets to be set aside to cover a auto accident.
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What Does Automobile Insurance Cover?
Auto insurance coverage depends on the type of policy you purchase. There are six primary types of coverage included in your policy. They include the following:
- Liability Coverage: Liability coverage is mandatory in most states, and drivers are legally required to purchase a minimum amount of liability coverage set by state law. Liability coverage includes bodily injury liability, which helps pay for costs related to another person’s injuries if you cause an auto accident, and property damage liability, which helps pay for property damage caused by your accident.
- Uninsured and Underinsured Motorist Coverage: If you’re hit by a driver who is either uninsured or underinsured, this coverage will help pay for medical bills or, in some states, repairs to your vehicle as a result of the accident. This type of coverage is required in some states and optional in others.
- Comprehensive Coverage: This type of coverage can cover damage to your car from theft, vandalism, fire, or natural disasters. It is optional coverage.
- Collision Coverage: If you’re in an accident with another vehicle, or you hit an object, collision coverage can help pay to repair or replace your car. It’s typically optional.
- Medical Payments Coverage: Medical payments coverage can help pay for injuries caused in an accident. It is required in some states and optional in others.
- Personal Injury Protection: This type of coverage is only available in some states, but it can also help pay for your medical expenses after an accident. It is required in some states and optional in others.
What are the Consequences of Not Having Auto Insurance?
Having automobile liability insurance comes with certain benefits that could be quite costly to be without, if you are in a car accident.
Your insurance provider will usually provide you with an attorney if you are sued. Without auto insurance, you will be stuck with having to hire your own attorney and even if the trial ends in your favor, you will have to pay all the court costs and attorney bills yourself.
If the other motorist sues you, and you do not have insurance or an attorney, you could personally owe up to hundreds of thousands of dollars if you are found liable. In that case, the other motorist becomes your creditor and could institute legal proceedings for collection of the money you were determined to owe.
Regardless of fault in a car accident, if you do not have auto insurance your state may carry penalty laws that forbid you from asserting any claims against other motorists in the event of an accident.
Should I Contact a Lawyer?
You should immediately consult a local personal injury attorney who has experience dealing with automobile accident claims. Your attorney will be able to advise you of your rights and let you know what possible courses of action you can take, along with what defenses you might have.