Financial Responsibility Laws require motorists to provide evidence that they can compensate third parties in case the car they own, maintain or use causes damages or injuries to anyone. So, this includes the automobiles in your care as well. For example, an executor of a deceased person would have to buy insurance for a vehicle in their care. It is an automatic assumption that the car is registered to be driven and/or kept on public roads and must comply with the requirements. It is up to the owner to declare the auto in question isn’t driven or kept on public roads and ask for exemption.
It is up to states to make sure motor vehicle operations are regulated. That is why you need to register them with the local DMV. You need to get a driving license if you want to operate a vehicle. And you need to show that you can pay for the damages you could cause to other citizens in case of traffic accidents.
No matter how good a driver you are there is a chance you could cause an accident in which people get injured or suffer property damages. In the light of this possibility, every state wants to make sure that motor vehicle owners make provisions to compensate for such losses they may cause. The easiest way of complying with these requirements is to buy car insurance liability coverage.
You need to purchase at least minimum liability auto insurance coverage to comply with nearly all financial responsibility laws. Otherwise, they may not register your vehicle or ask for the plates back. Also, local DMV constantly checks insurance status of the automobiles registered with them and penalizes the owners, unless they confirm the car is off the road.
Not all states require auto insurance as proof of financial responsibility. Three of them may accept bond purchase, cash deposit or proof of asset allocation to provide for possible liabilities. Virginia allows a fee payment for an uninsured vehicle for one year only. New Hampshire and Mississippi allow posting bonds instead. All the other 47 states and District of Columbia insist on having a vehicle liability policy in force.
Every policy sold in a state would automatically include the minimum liability car insurance coverage enforced. You can find the limits for your state here. Then, it is up to you to add more options like Comprehensive and Collision coverage to protect your car.
In general, automobile insurance is the easiest way to comply with the state financial responsibility laws. If you ever cause injuries and damages, your insurer not only covers the claims against you (up to the limit) but also defends you. Probably it would cost you a lot more to deal with a claim against you if you were to choose another method to satisfy responsibility requirements.
Also, each state has different penalties for drivers with no insurance. Depending on where you live, a car may be impounded, license plates taken away, driving licenses suspended and hefty fines applied. Again, check the rules if you want to learn more. Penalties are usually harsher if it is caught after an accident. And there is a high chance you will be taken to court for it.
Buying an automobile insurance policy is not just about staying legal but also making sure that you are well protected for most imaginable damages. Full coverage includes Liability, Comprehensive and Collision and not only pays for claims against you but also compensate for your own losses. Considering you may only need to pay a few hundred dollars more for it, you might as well have it in order to sleep well at night, knowing you are protected.