Car Insurance and Financial Responsibility, Part 2

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Part 1 of this series discussed why it’s not a good idea to drive without car insurance. Having proper auto insurance coverage isn’t just about obeying the law: it comes down to demonstrating financial responsibility for your actions on the road, and keeping you (and your family and other drivers) safe.

There are instances where obtaining car insurance isn’t easy, even though you must have it to legally drive. That’s why every state either participates in an assigned risk residual market pool, a joint underwriting association, or in some cases even offers low cost insurance from the state.

Assigned Risk Pools and Residual Markets

Assigned risk pools are intended to make insurance available for drivers who are considered high risk, for whatever reason. In general, high risk drivers are those who have poor driving records, or excessive traffic violations / tickets. These pools are considered the option of last resort for drivers who can’t get reasonably priced car insurance in the voluntary market. While these types of policies are by no means a way to get cheap car insurance, if you fall into this category of high risk driver and want to get back on the road following a license suspension, you may have no other choice.

AIPSO is the national insurance organization that administers a vast majority of the residual auto insurance market. You can get more information on AIPSO at their website and access specific information about the residual market in your state.

What if You’re Broke?

In a difficult economy, many consumers find themselves faced with cutting expenses due to a job loss or cutback of hours at work. With costs for everything rising, some families find themselves faced with making tough economic choices, such as a decision on whether to pay the car insurance bill or put food on the table. If you receive a car insurance policy cancellation notice for non-payment of premiums, you will find it difficult to get reinsured – and most certainly, the rate for a new policy will be significantly more than you paid in the past. Contact your state insurance commission if you receive such a notice.

With the rate of uninsured motorists climbing in every state, some states have taken steps to relieve some of the cost of auto insurance policies to low income drivers. For example, California recently expanded its pilot Low Cost Auto Insurance Plan to cover all drivers in the state who meet certain low income criteria, and who have a good driving record. The State of New Jersey requires all insurance companies licensed in the state to offer a low cost, basic auto insurance policy that has coverage in line with state mandated basic requirements.

The bottom line is that it’s risky business to drive without car insurance. Not only can you get into severe legal trouble for not carrying required insurance, but if you do get into an accident for which you’re at fault, you’re potentially placing yourself and your family in long term financial jeopardy.