Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 14, 2021

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Here's what you need to know...

  • When you buy a car that will be registered in your name, you are legally obligated to buy insurance that satisfies your state’s requirements
  • It’s important to check the state requirements to see if there are alternative ways to prove that you’re financially responsible when you own a car. Some states allow you to self-insure by purchasing a bond or depositing cash with the state treasury
  • If you’re financing or leasing, you can’t self-insure. Carrying full coverage insurance is a requirement under your contract and failing to comply with this rule could lead to repossession or forced-place insurance costs
  • You don’t have to own a car to buy auto insurance. If you borrow cars from friends or you rent cars regularly, you should purchase a non-owner’s policy that provides you with at least a minimum amount of liability protection
  • If you have been convicted of a DUI or another serious violation, you may be required to file an SR-22. If you are, you’ll need to buy SR-22 insurance to keep your license even if you don’t own a car

If you’re planning to buy a car, you should be prepared to buy auto insurance as well. That’s because auto insurance is required in virtually every state.

While buying a car typically means that you also have to buy insurance, you may need coverage even when you don’t own a car.

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Borrowing a car, renting a car, or having a long list of moving violations can put you at risk of losing your savings or your license.

It’s crucial that you know when to buy insurance and how insurance can protect you when you’re licensed to operate a vehicle. Here’s a guide that can help ensure that you comply with the law while buying adequate coverage:

Auto Insurance is Required in Most States


If you are buying a car or taking over ownership of a vehicle, you should check out the insurance laws in your state first.

Since auto insurance is regulated by the state, state officials decide how much insurance all legal vehicle owners must have to legally operate their vehicles.

The requirements and the limits that you must have vary based on the state you live in.

Most states have mandatory or compulsory insurance laws. If your state mandates that insurance is a must, you have no option but to buy a minimum amount of insurance when you have a car registered in your name.

The laws are in place to ensure that anyone who owns a motor vehicle is able to pay for damages that are caused while the car is being driven.

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Alternatives to Buying Auto Insurance

Some states have unique financial responsibility laws that give vehicle owners the option to prove that they have the finances to compensate pedestrians and drivers.

When you have the option to buy auto insurance, you still have to satisfy the state law by filing an acceptable proof of financial responsibility.

Some of the options that are available include:

  • Deposit cash with the state treasury in the amount that’s required under the vehicle code
  • Purchase a surety bond through a bond company licensed in the state and secure it with collateral
  • Apply for a certificate of self-insurance. You must be approved for the certificate before you can drive without insurance

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Insurance Requirements When You’re Financing or Leasing a Vehicle

If you decide that you want to lease or finance your vehicle, you must buy insurance regardless of what the state law says.

Under your finance or lease contract, it specifically states that you’re required to maintain full coverage property insurance on the vehicle. Full coverage means that the policy includes comprehensive and collision.

Even if you decided to file an alternative proof of financial responsibility, you need to have physical damage coverage on the car at all times.

Since you can’t buy an auto insurance policy that includes only comprehensive and collision, it’s best to comply with auto insurance laws by purchasing liability insurance.

When do you need auto insurance if you don’t own a car?


If you don’t own a car, it doesn’t mean that you don’t have a need for financial protection.

As long as you’re licensed to drive a car and you regularly operate vehicles that you don’t own, you have a risk of getting into an accident.

Just one accident, no matter how serious, can affect your financial portfolio and your future income.

You can’t buy a standard auto insurance policy when you don’t own a car, but you can buy a specialty non-owner’s policy that is designed just to suit your needs.

Non-owner’s insurance policies are issued to licensed drivers who don’t legally own a car or have regular access to a car. If you rent or borrow a car often, it’s wise to have this coverage.

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When are you legally required to have insurance even when you don’t own a car?

Under rare circumstances, you may be required to buy insurance even when you don’t own a car of your own. This happens when you’ve been convicted of a serious moving violation or driving without insurance in the past.

Selling your car doesn’t mean that you can avoid court-ordered requirements.

Since having a license is a privilege, some states require drivers to file an SR-22 to keep their insurance. If you have to file an SR-22 to keep your license or reinstate it, you’ll need SR-22 insurance.

This is a specialty product similar to non-owner’s insurance. The only difference is that you can get insurance if your license is suspended.

What are the benefits of buying insurance?

Having insurance can save you during tough times. Even when you’re given the option, it’s best to elect to pay insurance premiums instead of taking the chance.

You never know when you might be on the line to pay hundreds of thousands of dollar in damages because you chose to self-insure. When you have insurance, you have peace of mind in knowing a company will back you and pay for legal defense when necessary.

If you’re buying a car or you’re planning on getting your license back, you may be legally required to buy insurance.

Having adequate coverage is a must even if you don’t have to buy insurance under state law. Make sure to price the cost of auto insurance by using an online rate comparison tool, and you can choose a quality product that’s priced right.

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