Can you explain financial responsibility laws?

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Asked July 25, 2013

1 Answer


The term Financial Responsibility Law, FRL, is used to specify the auto insurance requirements of the different states. Even though some states do not have specific car insurance requirements, all states have FRL regulations that are generally served by having an applicable car insurance policy. There are other acceptable means of meeting the FRL requirements, but insurance is the most common method.

FRL specifics are different for each state, but typically specify the amount of liability coverage you are required to have. Liability is the cost of paying for damages, injuries, and legal processes that you are deemed to be at fault for. In other words, the FRL is designed to prevent you from causing harm to people or property without being able to pay for them. They are making sure that all drivers are financially responsible for their own actions.

In some states, you can meet FRL requirements by making a deposit with your state's Department of Motor Vehicles. This requirement typically requires you to make a deposit of $10,000 or more, leaving it in escrow with the DMV. Other states will allow you to prove financial responsibility by purchasing a bond, and some will even allow you to make a certified bank deposit. Companies which can show their financial resources meet or exceed the FRL may be allows to self-insure in some states.

In most states, you will need to provide proof of compliance with financial responsibility Laws in order to register your vehicle. The idea is that showing proof of FRL compliance at the time the vehicle tag is purchased helps to maintain a safer driving experience for everyone one the road. It may seem like FRL is just another way to get your money, but if you get T-boned by another driver, you will be glad that your states has those laws, because they protect you the same as they protect others.

Answered July 25, 2013 by Anonymous

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