What is meant by the law of ‘financial responsibility’?
The law in all the states stipulates that a person who had been convicted on a specific traffic violation or who had been involved in any accident should have proved his/her financially ability to meet the damage awards that could arise from such incidents. In theory, when a car is purchased and registered, this law does not insist that the proof of financial responsibility should be furnished or a car insurance should be purchased. However, when a person is involved in any accident or a traffic violation had occurred, then that person should be able to demonstrate that he/she possesses adequate resources for meeting the financial responsibility arising out of such an incident. Failure to do so could result in the suspension of the driving license or the revocation of the registration of the car.
Under the above law, not only the person at fault in the accident but also all the persons involved in the incident would be required to furnish proof of financial responsibility. Otherwise, they would have to face the penalties that are imposed under this law. If a person had purchased a car insurance policy, it would be deemed as compliance with the above law of financial responsibility.
What would happen if a person is not having a car insurance but is sued for causing the accident?
When a person is involved in a car accident, it would be necessary to hire an expert car accident lawyer for defense and advice in the court. The fees of the lawyer and the court related costs had to be borne, even if that person is not found guilty of causing the accident. On the other hand, if that person were found guilt, the judge would award a specific sum as damage liability to the injured person. Depending on the severity of the injury, the above liability award could even be very high. If that person fails to pay or pays only a part amount, further lawsuits would occur and increase the payment amount. It might not be possible to pay such amounts from personal resources. Hence, a car insurance is the most prudent action.