Car accidents can leave damaging, lingering effects to those involved, including financial ones. So, the state requires you to show you're financially responsible enough to operate a vehicle before you hit the road.

Ways to Establish Financial Responsibility

While some states allow their residents to prove their financial coverage through a variety of means, North Carolina residents must do so by carrying an adequate amount of auto liability insurance.

North Carolina Liability Insurance Requirements for Private Passenger Vehicles

To meet the required coverage, you must have at least the following amount of insurance protection:

• $30,000 of coverage for injuries or death involving one person in a single accident.

• $60,000 of coverage for injuries or deaths involving two or more people in a single accident.

• $25,000 of property damage coverage.

These are just the minimum limits; most financial professionals suggest that drivers carry much more insurance protection than this. As we detail in our Types of Coverage section, being without adequate coverage can be devastating to your financial future.

Premium costs, however, are often are an issue for younger drivers, and it's tempting to get by with just the minimum amount of coverage. However, smart consumers can easily find the best insurance rates online, or by calling the toll-free numbers set by insurance companies. With a little bit of effort, you may be surprised how much protection you can afford.

Proof of Insurance and Financial Responsibility

While insurance agencies can contact the Division of Motor Vehicles (DMV) concerning your insurance coverage, it's up to you to prove to the DMV that you meet the state's requirements by furnishing one of the following:

• Certificate of Insurance (FS-1) issued by your carrier.

• Policy number and name of insurance company.

Penalties for Failure to Maintain Financial Responsibility

What if you cancel your coverage and have no proof of insurance?

If your coverage stops, your carrier will notify the DMV. You must respond to the ensuing notice (Form FS 5-7) sent by the state within 10 days. If there was a gap in your insurance coverage, you'll need to pay the fee listed on the form, and include your current insurance information.

If you don't have the proper coverage or you don't respond to the notice, your license could be suspended for 30 days. Then, you'll have to pay a variety of penalties and fees that could total more than $200, and provide a completed Form FS-1 to the DMV, in order to get your license reinstated.