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Effective in All States

Summary: All states have laws that assure compensation for victims of automobile accidents. The five types of statutes in effect presently are: (1) financial responsibility laws; (2) compulsory automobile liability insurance; (3) unsatisfied judgment fund laws; (4) laws requiring uninsured motorists coverage; and (5) no-fault automobile laws. This article discusses the first three types, because uninsured motorists and no-fault laws are treated in other articles. See Personal Auto Policy – Part C for a discussion of uninsured motorists coverage and see Uninsured Motorists Requirements for a state-by-state examination of uninsured motorists regulations. See No-Fault Automobile Insurance for information on no-fault insurance. The articles immediately following that treatment deal with certain state-specific data on no-fault coverage.

Topics covered: Introduction Financial Responsibility Laws Compulsory Insurance Laws Unsatisfied Judgments Judgments and the Laws Insurance Policies and the Laws

Introduction

While statutes vary considerably among states, the purpose of all financial responsibility laws is to require owners and operators of automobiles to maintain a degree of solvency to compensate those they may injure by motor vehicles. If people cannot meet these minimum financial requirements, they lose their driving privileges. While there are several ways in which a person may establish solvency (such as a bond or a deposit in a financial institution), proof of automobile insurance automatically operates as a solution. In other words, none of the other requirements needs to be proved when the person shows proof of an automobile policy for bodily injury and property damage liability that meets the limits required by statute.

In general, the basic elements of financial responsibility laws—in various combinations—relate to accidents, to convictions for certain offenses, and to judgments arising out of use of an automobile. The manner in which the financial responsibility law of a given state, territory, or province deals with one or more of these elements is the basis of this discussion. Because there are as many variations as there are laws, these pages discuss in a general way the operation and objectives of these statutes—space does not permit a discussion of the specifics of each law.

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