If You're in a Car Accident and You Don't Have Insurance

If you don’t carry mandatory car insurance, you could face penalties even if the accident wasn’t your fault.

Most states impose significant penalties if you drive without having valid car insurance. If you are involved in a car accident and are found to have been driving without insurance, the penalties can be even more severe.

If You Live in a No-Fault Insurance State

At last count, at least 12 states followed what is known as a "no-fault" car insurance system.

In a no-fault state, if a person is injured in a car accident, that person is generally required to seek compensation directly from their own car insurance coverage. Only under very limited circumstances can the injured person step outside of the no-fault system and file a lawsuit.

So, if you live in a no-fault state and you don't have insurance, even if you're at fault for the accident the other driver probably can't name you as a defendant in a lawsuit and seek compensation directly from you. Only in limited circumstances is this possible -- typically where injuries are deemed "serious" or "significant" under the state's threshold definition, or when medical expenses exceed a certain amount, such as $20,000.

If a lawsuit is filed against you, because you do not have insurance you will be looking at paying any damages to the injured person out of your own pocket. You may also be faced with hiring a lawyer at your expense, unless you want to try to defend the case yourself. It is no defense to these lawsuits to tell the court, "I can't pay that amount." If you are found liable after a trial and you are ordered to pay the other driver's damages, a judgment will be entered against you (more on this below).

What If I Live in a Tort State?

States that do not follow the "no-fault" insurance system -- and this includes the vast majority of states -- are called "tort" states. In those states, if you cause a car accident and another person is injured, that person can sue you for all of the damages that person suffered from the car accident. This could include medical bills, lost wages, property damage, and physical and mental pain and suffering.

If you do not have an automobile liability insurance policy, you are personally responsible for paying these damages to the injured person. In other words, you will have to pay them out of your own pocket. If the case goes to trial and the other driver obtains a judgment against you, they have a number of options available to try to get some or all of that judgment satisfied, including garnishing your wages in some cases.

What If the Other Driver Caused the Car Accident?

If you were injured in a car accident caused by the other driver, there may still be certain restrictions on what you can recover against that driver, if you did not have your own car insurance.

Several states have a rule called "No Pay, No Play." In those states, if you did not have valid automobile insurance in place at the time of the accident, you're limited in the types of compensation you can receive for your injuries. You can't recover "non-economic" damages like compensation for pain and suffering, but you can still get reimbursed for your medical bills.

The reasoning behind this rule is that if you don't have the required auto insurance that could provide full compensation to another person, then you shouldn't be able to claim the full benefits of someone else's insurance if you've been the victim of a car accident. A recent list of "No Pay, No Play" states included:

Penalties for Driving Without Car Insurance

If you are in a car accident and found to be driving without valid insurance, many states also impose criminal or administrative penalties. Almost every state will punish you by fine of hundreds or even thousands of dollars. In addition, the Department of Motor Vehicles in most states will also impose penalties that include the suspension or revocation of your driver's license, usually for a period from a few months to one year.

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