Driving without auto insurance can get you in a lot of trouble in most states. You can be fined, lose your driver's license or even be jailed.
But if you live in Iowa or New Hampshire, you're in luck. They're the only states without laws mandating that drivers buy at least the minimum amount of auto liability insurance -- the most basic type of car insurance available. Auto liability insurance helps protect you in case you harm a person or property while driving your car (story continued below map).
In Iowa and New Hampshire, rather than being required to buy auto insurance, you can prove that you're financially responsible enough to pay for damage (out of your own pocket) if you cause an auto accident.
And that’s the rub. If you live in New Hampshire, you’ll need to have a roughly $75,000 bond on file with the Department of Motor Vehicles. In Iowa, the bond amount is $50,000. That money is meant to cover payment for damages caused by the driver who's at fault in an accident.
Even though it's not required, most drivers in Iowa and New Hampshire opt to buy auto insurance rather than coughing up tens of thousands of dollars.
“The most common reason people don’t have insurance is their inability to pay the insurance premium,” says Deborah Stone, assistant property and casualty actuary at the New Hampshire Insurance Department.
About 11 percent of drivers in New Hampshire are uninsured, Stone says. She attributes that, in part, to the state's "Live Free or Die" independent attitude. In New Hampshire, several attempts have been made to require auto insurance coverage, but they've failed. "People feel like state government should not mandate how they live their lives,” Stone says.
Drivers can slip through loopholes in some states
In all the other states, as well as the District of Columbia, auto insurance is mandatory, although there is wiggle room in some places. But you'd better be rich. Or own a lot of cars.
For instance, if you really don’t want to bother with auto insurance companies in California, you can do a couple of things: Put down a cash deposit of $25,000 with the Department of Motor Vehicles, or get a certificate of self-insurance from the DMV if you own a fleet of at least 25 vehicles (translation: you run a car sales lot).
It’s basically the same scenario in Washington state, where you either can plunk down $60,000 or prove that you own at least 26 vehicles, and in Ohio, where you’ll have to present at least a $30,000 cash bond or own at least 26 vehicles.
You don’t have to own a car lot to prove financial responsibility in states like Arizona and Wyoming, but you'd better have a nice bundle of money that the state can stash away. The cost to skip auto insurance in Arizona is $40,000; in Wyoming, it's $25,000.
Even with those loopholes, drivers typically wind up buying at least the minimum amount of auto liability insurance in those states. In Ohio, for instance, just 2.6 percent of the more than 435,000 drivers involved in auto accidents there in 2010 reported they didn't have auto insurance, according to Lindsey Bohrer, a spokeswoman for the Ohio Department of Public Safety.
The percentage of uninsured Ohio drivers falls in line with an InsuranceQuotes.com poll conducted online by Harris Interactive that showed 2 percent of American motorists said they were currently driving without auto insurance.
“Even in the absence of a mandate, the overwhelming majority of people have gone out and purchased auto insurance,” says Michael Barry, a spokesman for the Insurance Information Institute.