Laura Berry is a former State Farm insurance producer and insurance expert.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 18, 2021

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Here's what you need to know...

  • When you own a vehicle that’s designed to be driven on public roadways, that vehicle must be registered in your state of residence
  • Vehicle owners who’re registering their vehicle with the department of transportation must comply with state laws and vehicle codes before their plates will be issued
  • Car insurance is required either explicitly or indirectly in most states.
  • States have either financial responsibility laws or mandatory insurance laws that all vehicle owners must comply with to hold onto their license plates and to avoid penalties
  • Consider the auto insurance requirements in your state and what you need to be comfortable so that you can get all the benefits of your auto insurance
  • If you don’t purchase auto insurance or allow it to lapse, you’re at risk of being fined and penalized for choosing to ignore the law

High school students may learn how to drive a vehicle in high school, but they don’t ever take a particular class on how to comply with vehicle codes and insurance laws and why it’s crucial that they do. Since more than 95% of American adults own a car at some point in their lives, class requirements that would prepare teens and young adults to handle their personal business would make a lot of sense. But, until that time, it’s up to parents to teach their kids how to be law-abiding vehicle owners.

Do you think car insurance is a waste of money? When you own a car, you’re liable for damages caused at the hands of drivers in that car, which is why it is crucial to have insurance.

It could be you, your spouse, your child, your siblings, or even a friend; no matter who it is, you’re the liable party as the registered owner, so you will want your name on your policy. Just one single loss without having the appropriate measures of protection in place could leave you bankrupt. This is why it’s so vital that you purchase and maintain insurance when buying a car. This is also why virtually every state has a mandatory insurance requirement in place.

What does it mean to register a vehicle?

A vehicle’s license plate is similar to the driver’s license that you hold. The plate identifies which vehicles have been registered and what state they are registered through. To drive a private passenger vehicle on roadways, you need valid plates and valid registration. That registration establishes ownership of the car and designates who’s responsible for paying taxes and fines. It also specifies who will be held liable if the vehicle is involved in an accident and the motorist driving causes property damage or injury.

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What are the rules for registering a vehicle?

Once you sign a bill of sale, it’s your responsibility to follow state law and establish ownership through the Department of Motor Vehicles in a timely fashion. In the driver’s handbook, you can typically determine how many days you have to report the purchase to the DMV and transfer ownership. At this time, you’ll apply for your own registration even though you will probably keep the same plate.

When you’re registering a car, you’ll need more than just an application. The department will also require supporting documents so that your request for plates can be processed.

You will typically have between 10 and 30 days to gather the following documents so that you can complete your transaction:

  • ID card or Driver License to identify yourself
  • Bill of sale that describes the vehicle and states sales price
  • The title of the car that has been signed over to you
  • Odometer reading
  • VIN (found on title)
  • Proof the vehicle has passed a smog test
  • Proof of liability insurance or no-fault insurance

Is the same amount of insurance required in every state?

Auto insurance laws were once set by the Federal government. Interestingly enough, the duty of setting the requirements and monitoring compliance was passed on to the state by the McCarran-Ferguson Act in 1945. Ever since that act was passed, it’s been the state’s responsibility to regulate the marketplace and protect consumers. It’s also the state official’s job to set requirements to protect the public. This is why there are different limit requirements and different insurance systems used from state to state.

What type of insurance requirements are common?

A majority of states in the nation operate under tort law. In tort states, insurance companies use fault to determine which company will pay for damages. It’s most common for the policy of the party who’s primarily at fault to be charged for the loss. The primary fault is 51% or more. If you live in a state with a fault-based system, you are state-mandated to carry the following:

  • Bodily Injury
  • Property Damage
  • Uninsured Motorist Protection (only in select states)
  • Medical Payments (typically can be rejected in writing)

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What if your state operates under a no-fault system?

States that don’t have a fault-based system have their own modified form of a no-fault system. In no-fault states, companies don’t use the motorists’ allocation of fault to determine who pays for the medical bills. Instead, every party carries protection that pays for their own medical bills. However, fault is still used to determine which plan pays to repair the damaged property.

According to the Rocky Mountain Insurance Information Association, there are currently 12 states with some form of no-fault system. In these states, you must carry:

Are there alternatives to buying auto insurance?

In states with mandatory auto insurance laws, you have no option but to buy insurance when you own or lease a car. In other states, which have a financial responsibility law, there may be alternative options. If you choose to buy auto insurance, you must prove that you are financially responsible and that you can pay for damages out of your own pocket. Insurance is still the most popular way to comply with the law. Some types of proof that you can submit include:

  • Cash deposit with the department
  • A surety bond through a licensed bondsman
  • A self-insurance certificate issued by the department

Why should you buy insurance if the choice is there?

It sounds pretty tempting to skip making premium payments by buying a bond or posting a deposit. Still, you have no real financial protection when you choose alternative methods. When you have insurance, you have a fixed amount of security and a company to lean on. It’s also important to recognize that insurance companies pay for your court costs in addition to the price of a settlement.

If you don’t obey the law, you might end up paying more fines and fees than you would for your coverage.

Protect your assets and the finances you’ve worked hard to earn. Compare premium costs first and then make a selection. Use an online comparison tool to price all of the premiums at once. Then you can secure coverage in a matter of minutes. Enter your zip code in our FREE tool below to compare car insurance rates now!