Question of the Month: What states require individuals to have auto insurance, and do they provide any exemptions to this mandate?

Most U.S. states, and all in the Midwest, require motorists to have auto insurance. According to the Insurance Information Institute, New Hampshire is currently the only state where auto liability insurance is not compulsory. In that state, drivers can go without coverage by demonstrating they have sufficient funds in the event of an at-fault accident.
Some states with the mandate, though, do provide exemptions or alternative paths for individuals to comply. In Illinois, a religious organization and its members are exempt from the requirement if they “hold a bona fide conviction that the acquisition of insurance is contrary to their religious beliefs.” As an alternative to purchasing auto insurance, they must then: 1) provide evidence of paying damages for which they were liable, and 2) file an irrevocable letter of credit with the state.

Another approach is to give religious groups the option of self-insurance. (This option is also often made available to other groups and businesses.) In Georgia, for example, under legislation passed five years ago, the state provides a certificate of self-insurance to a religious group that can “provide coverages, benefits, and claims-handling procedures substantially equivalent to those afforded by a policy of vehicle insurance.” To secure this certificate, the religious group must file a “minimum security” with the state; the exact amount depends on the number of vehicles being insured. 

Other states allow individuals to post collateral in lieu of purchasing insurance. In Ohio, for example, motorists can bypass the insurance mandate by depositing money or government bonds in the amount of $30,000 with the state treasurer.

Though nearly every state requires auto insurance, many motorists still go without it — 12.6 percent of the nation’s drivers in 2013, an Insurance Research Council study found.

According to the Consumer Federation of America, lower-income drivers are much more likely to be uninsured than higher-income drivers. To help people afford a policy, the state of California has established a low-cost auto insurance program for individuals and families with incomes at or below 250 percent of the federal poverty level.

And to make it more likely that people are caught for driving without insurance, at least seven states (none in the Midwest) had insurance-verification systems in place as of January, the Insurance Information Institute reports. These systems require insurers to submit their list of policyholders, thus allowing the state to match the list with motor-vehicle registrations.

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