Iowa Car Insurance Laws

Even though the law in Iowa does not require drivers to carry car insurance per se, the state's Motor Vehicle Financial and Safety Responsibility Act makes the purchase of a liability policy a fairly attractive option for most vehicle owners. Read on for the details of these rules, how insurance coverage typically affects car accident claims, and more.

Iowa Motor Vehicle Financial and Safety Responsibility Act

The first thing to know is that Iowa follows a traditional fault-based system when it comes to financial responsibility for losses stemming from a crash: that includes car accident injuries, lost income, vehicle damage, and so on.

Under the Iowa Motor Vehicle Financial and Safety Responsibility Act, any driver involved in a car accident must be able to show financial responsibility for any resulting harm (from a practical standpoint, if the driver has liability insurance, the insurance company will absorb these losses, up to policy limits). Failure to demonstrate financial responsibility will likely result in suspension of driving and registration privileges, according to the Iowa Department of Transportation (more on this later).

In Iowa, a person who suffers any kind of injury or damage due to an auto accident usually can proceed in one of three ways:

• by filing a claim with his or her own insurance company, assuming that the loss is covered under the policy (in this situation, the injured person's insurance company will likely turn around and pursue a subrogation claim against the at-fault driver's carrier)
• by filing a third-party claim directly with the at-fault driver's insurance carrier, or
• by filing a personal injury lawsuit in civil court against the at-fault driver.

Note: In no-fault car insurance states, a claimant doesn't usually have this same range of options. After a car accident in a no-fault state, you must turn to the personal injury protection coverage of your own car insurance policy for payment of medical bills and other out-of-pocket losses, regardless of who caused the crash. Only if your injuries reach a certain threshold can you step outside of no-fault and make a claim directly against the at-fault driver. But Iowa drivers don't need to worry about no-fault after an in-state accident.

Complying With Iowa Law

While the vast majority of Iowa vehicle owners will comply with the Motor Vehicle Financial and Safety Responsibility Act by purchasing insurance, there are other ways to comply, according to the Iowa Department of Transportation, including:

• posting a bond with Driver & Identification Services
• getting a legal release of liability from the other parties involved in the accident
• being found completely not liable in a civil suit
• filing an agreement to pay the other parties' damages on an installment plan
• executing a warrant for confession of judgment promising to pay the other parties' damages on an installment plan, or
• filing evidence of complete settlement of all damages.

Both the owner and driver of a vehicle (if they're different people) must prove their financial responsibility in the event of an accident. Because of the way Iowa's system is arranged, it is almost always a more prudent decision to carry insurance than place a bet on being able to avoid all liability or pay all damages in the event of an accident.

If you choose to purchase liability insurance coverage, it usually must meet the following minimums:

• $20,000 liability coverage for bodily injury or death of one person in an accident caused by the owner/driver of the insured vehicle
• $40,000 liability coverage for total bodily injury or death liability in an accident caused by the owner/driver of the insured vehicle
• $15,000 liability coverage for property damage per accident caused by the owner/driver of the insured vehicle.

Liability coverage pays the medical bills, property damage bills, and other costs of drivers, passengers, and pedestrians who are injured or have their vehicle damaged in a car accident you cause, up to coverage limits. You can (and in some situations should) carry more coverage to protect you in case a serious crash results in significant car accident injuries and vehicle damage. Once policy limits are exhausted, you are personally on the financial hook, so higher insurance limits can help protect your personal assets in the event of a serious crash.

Your liability coverage will kick in if any family member is driving your vehicle, or if you've given someone else permission to use it. It will likely also cover you if you get into an accident in a rental car.

Remember that liability coverage doesn't apply to your own injuries or vehicle damage after a Iowa car accident. You'll need different (additional) coverage for that if you're involved in a car accident and no one else's coverage applies to your losses. For example, collision coverage (optional in Iowa) can pay for repairs to (or replacement of) your damaged vehicle after a car accident. Note that collision or comprehensive might be required under the terms of a vehicle lease or financing agreement.

Failure to Establish Financial Responsibility

According to the Iowa Department of Transportation, if you can't show financial responsibility after a car accident, your license can be suspended for one year (this applies to both the driver and the owner of the vehicle; the owner may also face suspension of vehicle registration privileges).

The only exceptions to the financial responsibility requirements are:

• if someone stole your car and was in an accident
• if the car accident did not cause bodily injury or property damage to anyone besides yourself, or
• if your car was parked (legally) at the time of the car accident.

Keep in mind that regardless of what the law requires you to do, the practical implications of driving without insurance are the same in Iowa as they are in every state: You face serious financial consequences if you cause a car accident and you don't have insurance