Why Financial Responsibility Laws Do Not Work

Financial responsibility laws were put in place by local governments in an attempt to protect the general public from major financial losses. The idea, in principle, is that financial responsibility laws force people to get minimum amounts of insurance that can be used to help if an accident occurs. The problem is that the situation doesn't really work this way as many people have found ways to beat the system. Failing to meet standard financial responsibility laws can result in severe fines or jail time.

Here are the top three reasons that financial responsibility laws don't work:

1. The people for who the laws were intended to force in to buying coverage do not have to show the responsibility has been met until it is too late. For instance, the driver of a vehicle may have had to show their financial responsibilities were met when they bought a vehicle. However, five years later they have a car accident and it comes to light that they cancelled their auto insurance coverage four years ago. Now that the accident has come and passed without valid coverage no insurance company will go back and give coverage for the time the vehicle wasn't covered. This is too late for the victim, who is left to fend for him or herself.

2. Since the first situation is there it leaves the victims of certain accidents in a situation where they will not be compensated. For instance, if you are hit by a hit-and-run driver or the driver of a stolen vehicle there would not be coverage. The state laws of financial responsibility can only go so far and in this sense they don't go far enough. The laws can only force the discipline in the absence of coverage.

3. Building on the previous point, even when a driver can prove financial responsibility they may not have enough coverage. State laws only require "minimum" liability limits which can sometimes be $5,000 or $10,000. This is hardly enough to pay medical bills or repair bills on newer vehicles this day in age. Since a driver can meet the minimum they will not be subject to fines from the state and in the end all you can do is file a lawsuit for the remaining amount. However, don't hold your breath to be reimbursed completely as people who can't pay for auto insurance rarely have a big savings account.