Wednesday, June 19, 2024

When Did Car Insurance Become Mandatory

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In recent years, we have seen insurance companies define their target markets as increasingly smaller niche’s, e.g., only nonsmokers, only those with clean driving records, only those between the ages of 25 & 55 who take defensive driving courses every two years, etc. The result has been that the broad coverage concept has been effectively destroyed.

Nowhere is this more evident than in mandatory automobile insurance coverage.

The overhead cost of insurance companies are out of hand. The auto repair system does not negotiate with manufacturers to purchase replacement parts on a volume basis. Fraud in repairs and claims is rampant. Large contingency fees are earned by lawyers suing insurance companies on behalf of clients. The insurance regulatory system that functions mostly as an extension of the insurance industry, is costly and provides the consumer few benefits. All this combines to make me wonder if the only real alternative is for everyone to become self-insured.

A Case Study

In October 1992, after 16 years of auto coverage with Aetna Casualty in the state of Texas, I discovered what it really means to deal with the insurance industry under mandatory automobile insurance laws. I received a notice from my insurance agent that Aetna would not renew my insurance as the agent was no longer authorized to write Aetna policies.

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Why Is Car Insurance Mandatory

Car insurance has been and still is one of the most affordable ways to protect a driver from license suspension and do the right thing in case of a significant car crash. Compulsory auto insurance became necessary in most states in the 1970s. Massachusetts was the first state to make car insurance mandatory for drivers in 1927 .

Have you ever wondered why car insurance is mandatory in America? Some citizens feel that car insurance is unconstitutional. There are some rhetorical questions when it comes to mandatory car insurance.

  • Does it violate the freedom given by the Constitution?
  • Why is car insurance mandatory in the first place?
  • Car insurance exists to protect yourself and your car. There is an explanation of why compulsory car insurance is not in breach of the United States Constitution.

    Your lender may mandate collision and comprehensive insurance under the loan agreement if you have financed your vehicle. In other words, they want their financial assets to be covered by insurancethe car. With car insurance, you want to protect yourself and your belongings. Insurance firms and consumer advocates usually recommend bodily injury insurance at least $100,000 per person and $300,000 per accident, considering that injuries can cost much more than those required by most states.

    Car Insurance Isnt Mandatory In Every State

    Yes, you read that right! Even after nearly 100 years, some states still do not require car insurance! However, these states do require some type of protection. Massachusetts unique requirement still holds as an individual can either deposit $10,000 in cash, stocks, or bonds with the State Treasurer who will then issue a receipt or obtain a motor vehicle liability bond equal to the state minimum limits. Mississippi and Arizona have a similar option through the State Treasurer. However, the Grand Canyon State requires a deposit of $40,000!

    But thats not the highest Texas allows you to establish financial responsibility through a surety bond or a deposit of $55,000! Typically, small business owners are the most common surety bond users as they rather pay out of pocket for an at-fault accident. Now if purchasing car insurance or depositing tens of thousands to a State Treasurer isnt for youtheres only one state left for you.

    New Hampshire! According to New Hampshires DMV website, New Hampshire is not a mandatory or compulsory insurance state. Proof of insurance may be required as the result of a conviction, crash involvement, or administrative action. Now the same website strongly recommends and urges to carry insurance BUT as long as youre not at fault for an accident you can drive without insurance in New Hampshire! And when you think about it, it makes sense for New Hampshire to be the only state considering their state motto is Live Free or Die.

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    Minimum Auto Insurance Requirements: How Much Coverage Do You Need

    Most insurance policies express the minimum amounts like the following: 25/50/25 , with the numbers corresponding to the individuals:

  • Personal injury damages,
  • All personal injury damages for one particular accident
  • All property damages for one accident.
  • Certain states provide only insurance covering bodily injury and damage to property caused to another person. You may require additional healthcare coverage, or what is also called personal injury protection, in other states. It covers the cost of healthcare that you or your passengers might require after a car accident. Some states may require uninsured and underinsured car insurance. This form of coverage is optional in other states. Collision and comprehensive coverage, although essential to your security, are still optional regardless of which state you are living in.

    Read: Does car insurance cover cosmetic damage to your car?

    Car insurance requirements are different, but drivers in all states need car insurance to protect themselves from liabilities that arise out of a car accident. However, the forms of coverage that form part of a car insurance policy must be familiarised with.

    On the other hand, liability insurance, which protects others and their properties, is almost always compulsory. It is assumed that others and at the same time, the economy will be impacted by the inability of drivers to compensate others for losses.

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    Where Were The First Auto Insurance Policies Offered

    Insurance for cars is mandatory and necessary. But did you know that ...

    It might be surprising to learn that insurance gradually became available across the country. While the first policies had their flaws, the first state to offer drivers the option to buy liability insurance was Connecticut. This was offered in 1925 to help drivers involved in accidents when Connecticut had already passed a law where drivers were required to prove they were financially responsible after an auto accident had already occurred.

    Connecticut required drivers to show financial responsibility in the event of an accident resulting in bodily injuries, death and property damage. The auto insurance law was one of the most effective ways to protect drivers from license suspension and act appropriately in the event of an accident resulting in serious consequences.

    This is why most insurers have headquarters located in CT. According to Connecticut law, drivers could meet their financial responsibility by purchasing liability insurance, providing a bond, depositing bonds, stocks, or other financial instruments or depositing currency. If the driver didnt provide any of these requirements, his license was suspended.

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    What Was The Origin Of The First Auto Insurance Policies

    It may be surprising to find out that insurance became more widely available throughout the country. While the first policies had their flaws, the first state to offer drivers the option to buy liability insurance was Connecticut. This insurance was introduced in 1925 in order to assist drivers who were involved in an accident. Connecticut already had a law that required drivers to prove their financial responsibility after an accident. This is why many insurers have their headquarters in Connecticut.

    How Can I Clear A Registration Suspension

    You must provide proof of Arizona liability insurance that was in effect at the time of the suspension. Or, if that proof cannot be obtained, you must pay a $50 reinstatement fee and provide current proof of Arizona liability insurance.

    Payment may be made by cash, cashier’s check or money order. Some offices accept credit cards. Cash and credit card not accepted by mail. No personal checks accepted.

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    Why Is Car Insurance Mandatory In India

    Team AckoAug 23, 2022

    People often wonder, why is car insurance mandatory in India? It is my money and I would like to spend it the way I want, why am I forced to buy insurance? Through this article, we will precisely answer this question. With increasing number of road accidents in the country, it has become a necessity to get a car insurance policy. Read-on to know why is car insurance mandatory in India.


    Mandatory Car Insurance In Illinois Upheld

    Why Car Insurance Mandatory explained by Ganna Freiberg

    The state`s mandatory car insurance law, which requires motorists to carry liability coverage or face fines, was upheld Thursday by the Illinois Supreme Court.

    The state high court rejected arguments that the law was unconstitutional because it discriminated against the ”working poor.”

    The measure was signed into law in 1988 after 17 years of opposition in the General Assembly, mostly by the insurance industry and some urban legislators. It became effective Jan. 1, 1990.

    Since then, more than 29,000 motorists have been convicted of violating the law and sent notices informing them that their license plates were suspended, according to a spokeswoman for the secretary of state`s office.

    The law requires motorists to have insurance that would pay at least $20,000 if they are liable for the death of or injury to one person, $40,000 if liable for accidents involving more than one death and $15,000 for property damage.

    The minimum fine for driving without insurance is $500. Getting caught a second time with no insurance and driving with suspended plates carries a $1,000 fine.

    A Jefferson County Circuit Court judge in Mt. Vernon ruled last year that the law was unconstitutional and dismissed traffic tickets issued to 17 motorists, including Bruce Simmons of Mt. Vernon, who challenged the statute. Judge Lehman Krause said the law was discriminatory and the penalties were excessive.

    The Supreme Court disagreed.

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    How To Get Cheap Car Insurance For New Drivers

    Insurance for new drivers is notoriously expensive often trumping the cost of a first vehicle. And the reason for this? Well, it relates to the concept which underpins insurance risk. It is estimated that 1 in 5 young drivers are likely to have an accident within 6 months of passing their test.

    The average cost of a policy for those in the 17 22 age range is £1,357 and that is on top of all the costs associated with learning to drive and passing the test in the first place.

    There are however ways to combat these costs. Read our handy tips and ensure you get the best deal possible.

    When And Why Did Car Insurance Become Mandatory

    Basic auto insurance is mandatory throughout Canada, though each province can determine the minimum amounts required. Accident benefits coverage is also mandatory throughout most of the country, including Ontario. Provincial oversight of the insurance industry is provided through the Financial Services Commission of Ontario.

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    Additional Kinds Of Coverage

    • You can buy insurance for extra equipment, such as stereos, CD players, custom wheels, navigation systems, and cell phones that are permanently installed.
    • You can buy insurance for towing and road service.
    • You can buy rental reimbursement insurance for renting a car when your car is being repaired after a covered accident.

    When Did Auto Insurance Became Mandatory

    What to do In an Auto Accident

    Heres what you need to know

    • The McCarran-Ferguson Act passed in 1945 stipulated that the state should regulate insurance industries and laws in the interest of the public
    • State officials establish mandatory car insurance requirements. They are also responsible for updating laws and regulations as necessary.
    • To ensure that they do good business, agents are licensed, and that the companies are financially sound, the state regulates companies doing business in the state.
    • Some states have financial accountability laws, while others have mandatory auto insurance laws that require you to purchase coverage.
    • Massachusetts was the first state that required insurance in 1925. New Hampshire, however, is the only remaining state where drivers are legally allowed to drive without insurance.

    In some states, auto insurance was not required. In some states, vehicle owners have the option of choosing how to pay for any damages they may cause. However, most states have their own car insurance requirements that protect all vehicle occupants, bikers and pedestrians while they are on the roads. Start comparing car insurance rates now by using our FREE tool above!

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    Introduction To Auto Insurance

    Auto insurance helps pay for the injuries and damage that can happen when you own and drive a car or other motor vehicle. This brochure can help you compare policies and make informed decisions when you buy auto insurance. It can help you understand your auto policy. Your policy is a legal document, and it is important that you understand it. Your motor vehicle may be an auto, truck, van, motorcycle, or another kind of private passenger vehicle.

    Save Money On Your Policy:

    • Ask about multi-car discounts, for insuring several cars.
    • Ask about mature driver and good driver discounts.
    • Ask about discounts for airbags, anti-theft devices, or other features.
    • Ask about payment installment plans and if there are service fees.
    • Ask about higher deductibles for comprehensive and collision coverage. This will lower your premium.
    • Think about dropping comprehensive and/or collision coverage on an older car.
    • If you do not have collision coverage, ask about uninsured motorist property damage coverage.

    Worksheet: How Much Insurance Do I Need?

    These are some of the common limits you can buy. Check off what you want.

    Liability CoverageBodily Injury Limits

    Limit for each Person/Limit for each Accident

    • $15,000/$30,000
    • $25,000/$50,000

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    How The First Auto Accidents Led To Insurance

    The worlds first recorded automobile accident happened in 1891 in Ohio City, Ohio when James William Lambert crashed into a tree. The vehicle held both James William Lambert and James Swoveland and was the first single-cylinder gasoline automobile. After crashing into a tree root, the vehicle swerved off and smashed into a hitching post.

    In 1896, years before insurance was introduced to the public, Henry Wells, a Massachusetts citizen, crashed into Evelyn Thomas, a citizen of New York. Evelyn was a bicyclist who ended up with a broken leg, and Henry spent the night in jail because of the accident.

    The first person to be killed by an automobile was Bridget Driscoll in Crystal Palace, London, UK, in 1896. Bridget walked in front of a car that was moving 4 mph while giving demonstration rides. Her fatal injuries led to her untimely death.

    Though the accident in 1891 was not as severe or deadly as the ones in 1896, they both served as great examples as to why mandated car insurance was needed. Human error added with vehicle malfunctions led to automobiles being a dangerous weapon.

    In all three instances, car insurance could have helped the situation or at least increased the level of alertness within the drivers, potentially preventing the accidents from happening.

    Choosing An Agent Or Broker

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    Choose your agent or broker carefully. Can you trust the agent or broker? Do you feel that they will put your interests first?

    You can look for agents or brokers in your local yellow pages or online. Or ask for names from family members, friends, neighbors, or co-workers. Ask:

    • Did the person take the time to fully explain your policy?
    • Did they answer all your questions?
    • How did they respond when you had a claim?
    • How often do they contact you to review and update your policy?

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    Is Car Insurance Mandatory In All States

    Forty-eight states require drivers to carry some level of liability coverage in order to get behind the wheel.

    New Hampshire doesn’t require the average driver to carry insurance, although they do have minimum requirements for those who choose to purchase insurance. If you don’t carry car insurance in New Hampshire, you’re still required by law to show proof of financial responsibility if you’re liable for someone’s injuries or damages in an auto accident. Note that if you’ve had prior vehicle-related infractions, New Hampshire may require you to carry auto insurance.

    Virginia has minimum insurance requirements similar to other states but allows a driver to pay a $500 fee to opt out of these requirements and become an uninsured driver.

    Individual states regulate the type and amount of car insurance required. Generally, those requirements include auto liability coverage for bodily injury and property damage. Liability coverage may pay for the damages and injuries you cause to others due to an auto accident. Learn more about car insurance requirements by state.

    Since each state sets different rules for car insurance, other types of mandatory car insurance requirements may include:

    • Liability for death per person
    • Liability for death per accident

    The 1925 Connecticut State Law

    Granted, insurance and driving laws in the age of smart cars are different than how they were in the age of the roaring 20s, but they both served similar purposes. Auto insurance was offered as an option to keep drivers safe and prevent drivers license suspensions.

    Car accidents began to grow as an issue amongst automobile drivers, so as an effort to divert this issue, the Connecticut State Law of 1925 was enacted. Due to auto insurance not yet being mandatory, the 1925 Connecticut law pushed drivers to demonstrate financial responsibility.

    Drivers could provide proof of this responsibility by:

    • giving a bond of $10,000,
    • depositing other forms of collateral worth $10,000,
    • depositing $10,000 in cash,
    • or purchasing liability coverage at a minimum of $10,000.

    The point of offering financial responsibility as an alternative to automobile insurance was to allow drivers to prove they could cover damages with cash, bonds, or insurance.

    The option between one or the other was taken away a couple of years later after it was demonstrated that giving drivers the option was not in the best interest of the public. The only state that currently has no auto insurance requirements in New Hampshire.

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