When did auto insurance become mandatory?

Americans have been using cars since the early 20th century. The launch of Ford’s Model T democratized the automobile in the U.S., and the rising popularity of cars meant a rise in car accidents. Lawmakers then had to answer the question, who should pay for these losses? 

This is when auto insurance came into play. Car owners found it was cost-effective to invest in insurance rather than pay the amount out of their pocket in case of an accident. So when did car insurance start becoming mandatory? We’ll cover that below. However, you must also understand that each state has its own minimum car insurance requirements. What is required isn’t the same across each state. 

When did car insurance start becoming mandatory? 

You did not always need auto insurance to drive a car. In the early nineteen hundreds, you could drive without insurance. While auto insurance as a product first became available in 1898, according to the Insurance Information Institute, it was only in 1925 that Connecticut law recognized the financial responsibility of the drivers responsible for car accidents resulting in injury, property damage, or death. 

The Connecticut law that made drivers liable for injuries they cause on the road motivated drivers to buy liability insurance, but it didn’t make auto insurance mandatory. The law only stated that the car owner will be responsible for the damages. It was up to car owners to choose how they pay for the damages. 

While Connecticut recognized the importance of car insurance and recommended it, Massachusetts enacted mandatory auto insurance into law in 1925. It remained the only state with compulsory car insurance for more than three decades.

The New York legislature passed mandatory auto insurance law in 1956, followed by North Carolina in 1957. From here on auto insurance picked up the pace. By 1970, 48 states had made auto insurance mandatory. 

How Mandatory Auto Insurance Works Today

Car insurance is mandated by law in 48 states and the District of Columbia even today. Car owners in all but two states are required to buy auto insurance to protect themselves from potential loss in case of an accident, theft, or vandalism. 

While 48 states have mandatory car insurance laws, the laws for each state are different. Each state has different minimum coverage requirements and has different mandatory insurance. The car insurance laws also differ because of the no-fault and at-fault laws in each state. 

While insurance is mandatory in 48 states, New Hampshire and Virginia don’t have mandatory car insurance laws. According to the DMV, in New Hampshire, there are no regulatory laws, though it’s strongly encouraged that all drivers carry insurance. Also according to the DMV, in Virginia, there are a few different ways you can provide you’re financially fit to drive without insurance. So while it is legal to drive without auto insurance in these two states, you will still be liable for any costs if you cause an accident. 

Not All Auto Insurance is Mandatory 

Times have changed, types of cars have changed, and so have the types of insurance policies. Liability auto insurance coverage is no longer the only car insurance available. There are many different types of car insurance coverage available today. You have so many choices, such as comprehensive car insurance coverage, in order to protect against fire, theft, and other perils.

There are also alternative insurance payment structures, for example, pay-per-mile insurance that allows you to pay as you drive. However, liability insurance is still the only auto insurance required by law. 

Why do you need car insurance? 

Who will pay for the damages in case of an accident?  Having car insurance will protect you in case you suffer financial losses that might arise if you meet with an accident. Your auto insurance will pay for repair expenses, medical bills, legal fees, and lost income. 

Did we always need car insurance? 

While auto insurance has existed in some form since 1898, it only became mandatory in most states around 1970. It is the states that decide the auto insurance laws and not the federal government. Massachusetts was the first state to make insurance mandatory, passing laws to do so in 1925.