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Proof Of Financial Responsibility

If you are shopping for car insurance, you've probably come across the term "financial responsibility." This is because most state laws that require you to have car insurance are referred to as financial responsibility laws. 

Continue reading as we shed light on what financial responsibility is and how you can stay compliant with your state laws that require you to show proof of financial responsibility.

What Is Financial Responsibility? 

In the car insurance world, financial responsibility refers to money you are responsible for paying to someone when you cause damages or injuries in an accident. 

For example, if you get into a car accident and it is determined that you caused the car accident, you can be held financially responsible for any costs related to injuries or property damages suffered by other people as a result of that crash. Most states require you to prove that you are "financially responsible" for potential accidents. 

Proof of Financial Responsibility 

When you'll need to provide proof of financial responsibility will depend on your state's laws. Some common instances when you must show your proof of financially responsibility include the following:

  • When registering your car. 
  • To a police officer during a traffic stop.
  • After you have been involved in a collision. 
  • When reinstating your drivers license after it had been suspended or revoked. 

If you are unable to provide proof of financial responsibility, you'll be subject to fines and penalties, depending on your state. 

How to Provide Proof of Financial Responsibility

In most states, there is generally more than one way to fulfill financial responsibility laws. 

Car Insurance 

Car insurance is by far the most common way to fulfill financial responsibility laws. 

Typically, your car insurance policy will have to include liability insurance that meets your state's mandated minimum limits for bodily injury and property damage.

You can provide proof of financial responsibility with proof of insurance, which comes in the form of:

Some states also require you to have additional types of insurance coverages, such as uninsured or underinsured motorist protection as well as personal injury protection

Other Forms of Proof of Financial Responsibility

Several states allow drivers to prove financial responsibility through means other than car insurance. Some examples include:

  • Posting a surety bond with your state.
  • Keeping a cash deposit with your state.
  • Filing a government bond with your state.

Consult your state's DMV to see what other financial responsibility options exist for you.

What Happens If You Don't Have Proof of Financial Responsibility

Penalties for violating financial responsibility laws vary from state to state. 

Common penalties include the following:

  • Suspension of your vehicle registration.
  • Suspension of your driver's license.
  • Fines. 

You should also consider the fact that financial responsibility violations tend to result in having to pay higher than average car insurance rates.

NOTE: If you are caught driving without proof of financial responsibility or insurance, but you did have car insurance, most state courts will reduce your fine or penalty if you are able to prove that you were insured at the time of your violation. 

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