Auto insurance became mandatory, in a most basic form, in 1927. The first state to offer auto liability insurance was Connecticut, in 1925. Connecticut required drivers to demonstrate financial responsibility in the event of an auto accident resulting in injury, death, and property damage.
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Auto insurance was simply one of the most cost-efficient ways to protect the driver from license suspension and to do the right thing in the event of an auto accident resulting in serious consequences. Truly mandatory auto insurance became necessary in most states in the 1970s. Massachusetts was the first state (second to Connecticut’s financial responsibility statute and premise) to make auto insurance mandatory for drivers in 1927.
What did early Connecticut auto insurance laws require?
Connecticut, the home of many insurance companies, was first to offer auto liability insurance. The driver of any involved vehicle in an accident resulting in injury, or property damage (greater than $100), was required to demonstrate financial responsibility (at a minimum level of $10,000) according to Connecticut Public Acts, Chapter 183 in 1925.
According to Connecticut law, the driver could comply with the financial responsibility demonstration by:
- Purchasing motorist liability insurance in this required amount
- Providing a bond at this amount when required to do so
- Depositing bonds, stocks, or other negotiable financial instruments of this amount or greater
- Depositing currency in this amount
If the driver didn’t perform any of these actions to demonstrate financial responsibility, his license was suspended. If an injured person didn’t complain after being involved in an accident, the state didn’t know about it!
How did auto insurance laws differ from financial responsibility laws?
Although the law stated that motorists weren’t required to demonstrate financial responsibility until an accident occurred, many people decided that preparing for an accident before it happened was an excellent way to transfer risk. That’s why, at least in the beginning, auto insurance was considered an optional risk management tool.
Insurance companies were also able to underwrite auto insurance on future auto accidents or mishaps. Drivers with a desire to think ahead thought early auto insurance was a good idea.
Although Connecticut’s statute required that drivers prove financial responsibility after an accident (and the state allowed one accident prior to making the driver comply with the statute), many people thought that auto insurance provided extra financial protection. Connecticut’s lawmakers maintained the optionality of auto insurance as a measure of free will.
When did auto insurance laws for other states appear?
For these reasons, most states passed financial responsibility and auto insurance laws from 1925 through 1965. The four kinds of laws passed by the states included:
- Financial responsibility statutes
- Mandatory auto insurance laws
- Uninsured driver penalties
Massachusetts’s 1925 statute was a forward-thinking law. Until 1957, Massachusetts remained the only state that required auto insurance by law. New York followed by passing a law in 1956. North Carolina then joined the group in 1957. Thereafter, all states (except Wisconsin, Tennessee, and New Hampshire in the year 2000) required auto insurance for all drivers.
By 2010, 49 states and the District of Columbia required compulsory auto insurance. In 2011, New Hampshire is the only state that does not require auto insurance in order to register an auto mobile there.
Are there any states today that do not require auto insurance?
New Hampshire, the Live Free or Die State, still allows drivers the choice to drive uninsured. It remains steadfast in its support of each driver’s financial responsibility to operate and drive an automobile. That’s the reason most drivers in all states purchase auto insurance. Also, it’s why uninsured motorist protection remains very important.
New Hampshire’s “security” laws were passed in 1937. All drivers involved in road accidents that resulted in injury, property damage, or death must present proof of financial responsibility. Like the earliest financial responsibility laws passed in the United States in the 1900s, the event of an accident activates the financial security laws. If the driver cannot demonstrate financial assets supporting his ability to repay another person for injuries, damages, or death suffered in an accident in which he is “at-fault,” his driver’s license is immediately revoked.
Now you know about when auto insurance became mandatory in the United States. Auto insurance remains the simplest way to demonstrate financial responsibility in all 50 states. Comparing your auto insurance rates with those of other auto insurance providers makes good financial sense.
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