Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Written by Shuman Roy
Content Writer & Entrepreneur Shuman Roy

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jun 28, 2022

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Insurance Q&A: “Is car insurance required in every state?”

Simply put, no, car insurance is not required in every state.

Currently, 48 states and Washington D.C. require that you obtain mandatory minimum car insurance before operating a motor vehicle.

Basically, this means you have to have proof from an insurance company, evidenced by an I.D. card or a Declarations Page, to document that you have an active insurance policy.

Think of it this way, you wouldn’t want to be injured by a driver who didn’t have enough money to get you back on your feet, right?

So which two states are behind the times?

Wisconsin and New Hampshire. Tsk. Tsk. (Update: Auto insurance now mandatory in Wisconsin)

Should we all move to one of these states tomorrow to save big bucks on car insurance? It’s not recommended.  There’s a catch to the “no insurance” requirement in each of these states.

While you don’t necessarily have to carry insurance on your vehicle, you do have to prove that you are in a financial position to pay for damages you may be liable for as a result of a car accident.

How is this accomplished?

Well, for the “average Joe,” it turns out an insurance policy is the best way to satisfy this financial requirement if you don’t have a lot of cash on hand.

But there are other options:

Post a Surety Bond: I’ll spare you the entire explanation, but basically it’s similar to how an insurance policy works, though you don’t necessarily make monthly payments. You just have to prove you have the money at the time the bond is issued.

If you cause an accident, and don’t have the cash on hand, a third party company will pay for the damages, then you have to pay all of the money back to them – with insurance, you don’t have to pay it all back.

Use Personal Funds: This is best described as a form of self-insurance, where you can prove you have a least the minimum state liability car insurance requirement on hand. Again, you’d have to be in a pretty good financial position to have this type of cash on hand in case something comes up.

Get a Certificate of Self-Insurance: See explanation above. This is another form of a bond, where you put all the money in “up front,” and don’t have access to it. Your money would just sit there, waiting for you to get in an accident.

So at the end of the day, insurance isn’t required in every state, but you better be able to prove financial responsibility in every state before you operate a motor vehicle.

I highly recommend you get insurance quotes online or contact an independent agent if you are currently uninsured. This is the best way to ensure you get the best coverage at the lowest available rate.