Is mandatory car insurance unconstitutional?

It may seem like a violation of your freedoms for the government to mandate car insurance, but state financial responsibility laws for registered car owners are not unconstitutional.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Feature Writer Rachel Bodine

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: May 12, 2022

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Things to Remember

  • To determine a state law’s constitutionality, the federal courts consider if the law involves a fundamental right, affects a protected class of people, or impacts a constitutionally guaranteed right
  • Driving is not a constitutional right, so state laws mandating auto insurance and fines for driving uninsured apply to all drivers
  • 49 states have mandatory car insurance laws, except New Hampshire, which requires an annual fee and assurance of financial responsibility

It’s understandable to wonder why you need to buy auto insurance if you can pay damages in an accident you caused. However, states must solve the problem of uninsured drivers who leave seriously injured accident victims high and dry with no way to recover their damages.

Mandatory auto insurance laws protect drivers and victims from devastating financial loss from a car accident, but are laws requiring people to buy auto insurance unconstitutional? Before we get to the answer, here’s some background on the standards used to test if a state law is constitutional.

When is a state law like mandatory auto insurance unconstitutional?

You can find the state’s power to make laws in the Tenth Amendment of the U.S. Constitution. The amendment says, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the States respectively, or to the people.”

So if a state’s laws do not conflict with federal laws or infringe on a person’s constitutionally protected rights, then states have the right to enact their own laws.

Conversely, if a state’s law violates the Constitution and fundamental rights given to the people, it will be struck down as unconstitutional.

How can states make laws that infringe on people’s rights?

America is a country of law and order. As citizens, we make sacrifices to live together in a communal society. States need to enact and pass laws to maintain order, establish uniform rules, protect certain rights and liberties, and ensure the public’s general safety and welfare. Without laws, there would be chaos and anarchy.

So, to achieve the ends of government and function in modern society, many of the state laws will inevitably infringe on certain citizens’ freedoms. But, when are state laws that encroach on an individual’s freedoms considered unconstitutional?

The answer depends on whether the state law affects a fundamental or express right guaranteed under the U.S. Constitution. If it does, then there must be a compelling reason for the state law to exist, and the law’s purpose should be to achieve that reason. In other words, the narrowest means must justify a compelling end.

What are the standards for determining if a state law is constitutional?

Federal courts decide if a state law violates the U.S. Constitution. Courts determine the constitutionality of a law by using one of three standards of judicial review depending on whether that law impacted a fundamental, constitutionally-protected right. 

The three judicial standards of review for determining whether a state law is unconstitutional are listed below.

The Rational Basis Test

The rational basis test is the lowest level of scrutiny. The test gets applied when the state law at issue does not impact any fundamental or constitutionally-guaranteed right.

For example, all states have public indecency laws that make it illegal for people to be naked in public. The Constitution does not guarantee the right to be nude, so laws prohibiting people from exposing their genitals only need to show a rational connection to the state’s legitimate goal of preventing public lewdness. 

However, the standard of judicial review is higher if a state’s law impacts a fundamentally protected right, such as due process or equal protection under the law. In those cases, courts will review the law under intermediate or strict scrutiny.

The Intermediate Scrutiny Test

The judicial system applies intermediate scrutiny to laws that affect a protected class of people, like women, minorities, and the disabled, or laws impacting a fundamental right. The state must show a vital government interest and that the law itself is substantially related to accomplishing that interest.

This level of intermediate scrutiny often gets applied in commercial speech cases. Although the First Amendment protects the freedom of speech, the Constitution talks about an individual’s right to speech, not a company or business. As such, states can regulate commercial speech because it has an important governmental interest in protecting consumers against false and fraudulent advertising.

The Strict Scrutiny Test

As the name implies, strict scrutiny is the highest level of judicial review. State laws will be subjected to a strict scrutiny review if it impacts a fundamental right under the Bill of Rights or the due process clause of the Fifth Amendment or the equal protection clause of the Fourteenth Amendment. 

For example, look at gun laws. Since the Second Amendment protects the right to bear arms, any state law affecting gun ownership rights must have a compelling state purpose, and the law’s text must achieve that purpose.

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Do all states have mandatory car insurance laws?

Automobile insurance is mandatory in all states except New Hampshire.

49 out of 50 states have mandatory car insurance laws to protect both at-fault motorists and auto accident victims.

In serious car accidents, uninsured motorists leave accident victims with significant injuries and damages costing hundreds of thousands of dollars, creating the risk of financial ruin for the uninsured driver and accident victims.

State laws requiring the minimum general liability coverage shield drivers and passengers from the catastrophic financial burden of vehicular accidents.

Though New Hampshire doesn’t require motorists to purchase car insurance, it does have a law requiring registered car owners to sign a document stating they have sufficient assets to cover damages from an accident. Drivers who sign the statement must also agree to accept liability for accidents and pay a $500 annual fee at registration renewal.

If you drive uninsured in New Hampshire and cause an accident, your driver’s license may get suspended until you pay for the damages.

Regardless of the state you live in, it’s important to understand the financial responsibility laws of your state so that you don’t face serious consequences if you get caught driving without car insurance or proof of financial responsibility.

The Bottom Line: Is mandatory auto insurance unconstitutional?

The bottom line is that state mandatory car insurance laws are not unconstitutional. However, some argue that the government shouldn’t have the right to force drivers to buy minimum liability insurance or get hit with monetary fines, driver’s license suspension, and imprisonment.

Driving is not a constitutional right. States issue driver’s licenses as a privilege they can suspend or revoke if a driver disobeys the law, like mandatory car insurance and other financial responsibility laws.

Another argument against mandatory financial responsibility laws is that they discriminate against poor and working-class people. That argument didn’t hold up since fines are the same for everyone, though some struggle more to pay them than others.

A bill, however, called the Prohibit Auto Insurance Discrimination Act, was introduced into the U.S. House of Representatives. The proposed federal law would prohibit automobile insurers from determining insurance rates and eligibility based on factors like education level, occupation, and credit score, which result in higher rates for lower-income drivers. In comparison, affluent drivers receive lower rates.

Auto insurance is an expense, but it doesn’t have to cost an arm and a leg. If you can’t afford car insurance or want the most affordable auto insurance rates, shop around and ask about ways to get lower rates, like safe driver programs, student discounts, veteran status, and other discounts for membership or group affiliation.

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