Compulsory Liability Insurance

Every state in America and all Canadian provinces have some sort of Financial Responsibility Law with regards to owning and operating motor vehicles.  These laws are designed to protect the general public against drivers who are financially unable to pay for injuries or damage to properties caused in accidents as a result of their negligence.

Proof of financial responsibility may be required for several years following an accident.  Commissioners of Motor Vehicles usually do not require financial security if an insurance company of the owner of the vehicle furnishes a notice (SR-21) stating that an acceptable amount of liability insurance is in effect at the time of the accident.  The owner’s driver license will be suspended if he is unable to furnish security or proof of financial responsibility.  Such suspension continues until security or proof is furnished, or until a certain number of years after the accident, provided no lawsuit is filed.

Almost all the states, and the District of Columbia, require financial security be in effect on all registered vehicles.  Most compulsory liability statutes mandate that registered vehicles maintain a minimum amount of security.  The statutory limits are used to pay for injury to or death of anyone person in an accident, and property damage.

Most states require proof of insurance at the time of registering the car.  Proof of financial security is required to be maintained continuously throughout the registration period.

Penalties for noncompliance vary from state to state. In New York, if a vehicle owner’s insurance is not in full force during the entire registration period, his vehicle registration is subject to suspension.  In place of a suspension, the owner has the option to pay a fine of $8 per day (as of this writing) for the first 30 days the vehicle is without insurance.  After 30 days, for days 31 to 60, the penalty is increased to $240 plus $10 a day for every day being non-compliant.  After 60 days, the fine is yet increased to $540 plus $12 for each day being uninsured.  This civil penalty option is available only once every 3 years.  A second offense in any 36-month period will ensure suspension.

After 90 days of non-compliance, there is no option for civil penalty.  The owner’s driver license will be suspended.  Suspension period will be the number of days the registered vehicle is uninsured.

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