When Did Auto Insurance Become Mandatory?

Today, auto insurance is mandatory in 49 out of 50 states in the US. There are so many strict auto insurance laws to ensure every vehicle owner and driver in the US is insured. But there was a time not too long ago when auto insurance wasn’t legally mandatory.

So, when did auto insurance become mandatory? Massachusetts and Connecticut are the first US states to enact mandatory auto insurance laws in 1925. However, Massachusetts was the first to enforce the law, officially putting it into effect in 1927.

Over time, other states have gradually introduced, and refined their auto insurance requirements, shaping the auto insurance laws we have today.

Brief History of Auto Insurance

Back in 1897, auto insurance was an alien concept, most people didn’t even know what auto insurance is and why it’s necessary. However, the year holds a broad significance in the early history of auto insurance in the US.

According to Ohio Historical Society, Gilbert J. Loomis was the first person to purchase auto liability insurance for just $5 from Ohio Automobile Insurance Company for just $5 in 1897. In the following year, Dr. Truman Martin was the second person in the US to purchase auto liability insurance with a coverage limit of $5,000 for an annual insurance rate of just $12.25 in 1898.

In today’s dollars the same auto liability insurance coverage would cost Dr. Martin about $316.25, while the average cost of minimum auto insurance is about $869 per year.

The first two purchases of auto insurance caused a revolutionary chain in the US leading to the growing necessity, and widespread demand of financial protection. In the year 1902, comprehensive auto insurance was first introduced providing financial coverage for fire and theft.

While auto insurance is a lot more expensive today, you can still purchase it at a cheap and affordable rate. As a reliable auto insurance agency in Michigan, we prioritize providing affordable car insurance with the best coverage options. In addition, we have regional offices in Flint MI, Saginaw MI, MT Pleasant MI if you want to visit our office and directly consult with our auto insurance experts.

Massachusetts and Connecticut: The First US States to Mandate Auto Insurance

According to the NHTSA, the first ever motor vehicle crash occurred in 1896, when a motor vehicle crashed into a bicycle. In 1899, a pedestrian was killed upon being accidentally hit by a taxicab. As automobiles were new, these two car accidents played a crucial role in the widespread awareness of the growing necessity to mandate auto insurance.

Soon, the groundbreaking revolution finally happened as mandatory auto insurance laws were enacted in 1925 in two US states which includes Massachusetts and Connecticut.While both of these states enacted auto insurance laws, there were significant differences in the newly formed auto insurance laws.

In Connecticut you would only require proof of financial responsibility with a minimum auto liability coverage of $10,000. However, those who can afford out of pocket expenses had the option to opt out.

On the other hand, Massachusetts applied a strict mandatory auto insurance policy which is basically preliminary version of the modern mandatory auto insurance law that we follow today.

Ever since the new auto insurance law went into effect in 1927, every car owner and driver would require auto insurance to legally register a car and drive it on the streets. Back then the minimum auto insurance coverage in Massachusetts was $5,000 for bodily injury per person, and $10,000 per accident.

Evolution of Auto Insurance Laws Across the US

After auto insurance became mandatory in Massachusetts and Connecticut in 1925 and 1927, other states gradually followed by introducing, adopting, and amending their requirements. The table below shows how each state in the US gradually mandated auto insurance as follows.

While every state in the US requires auto insurance, it is still optional in New Hampshire. Yes, New Hampshire is currently the only state in the US where auto insurance is not mandatory. Apart from New Hampshire, auto insurance is mandatory in all other 49 states out of 50 states in the US.

Why Did Auto Insurance Become Mandatory?

Typically, auto insurance laws vary from one state to another. Whether you’re located in an at-fault state or a no-fault state, it is mandatory for you to acquire auto insurance in every state in the US except New Hampshire.

Since 1925 till now, the reasons almost every state in the US made auto insurance mandatory include the following.

• Protects You Financially: If you’re the one who’s responsible for the car accident then you will have to compensate the damage to the other driver. This can include the other driver’s vehicle damage, property damage and bodily injuries.

• Encourages Responsible Driving: While carrying auto insurance provides financial relief, it also makes you more cautious. Getting involved in accidents or claiming car insurance frequently can lead to higher premiums in the following year.

• Prevention of Legal Dispute: Most at-fault accidents don’t go into legal dispute as auto insurance compensates the victim or the other driver, their passengers, pedestrians or anyone else harmed by the accident. So, getting mandatory auto insurance can even secure you from legal disputes.

Auto Insurance Laws in the U.S. Today

Based on the current auto insurance laws in the US, it is mandatory for you carry at least the minimum liability auto insurance in every US state except New Hampshire. Although car insurance isn’t mandatory in New Hampshire, if you choose to not purchase the minimum auto insurance, then you need to have a fixed deposit or purchase a bond as proof of financial security.

So, if you run into an accident, and if you’re at-fault for it then you will have to compensate the other driver or any other third party affected by the accident which will be deducted from your fixed deposit or the bond you’ve purchased.

Either way as liability compensation is mandatory, that means auto insurance is virtually a requirement in every state in the US. Just recently liability auto insurance became mandatory in Virginia in January 2024.

The Bottomline

Typically, auto insurance first became mandatory in Massachusetts and Connecticut in 1925. In the same year, it was also introduced in Hawaii. Gradually, auto insurance became mandatory in Nebraska in 1949, followed by Montana in 1951, New York in 1956, and North Carolina in 1957. Many other states adopted similar laws throughout the 1960s, 1970s, and beyond.

Today, you cannot legally register a car or drive it publicly without auto insurance. So, if you need auto insurance in Michigan, you can contact us to get a free quote and consultation. To ensure that you stay financially protected with adequate coverage our insurance agent will recommend you the best auto insurance plan within your budget.

FAQ

When did the US start requiring car insurance?

Car insurance has been required in the US mainly from 1925, as Massachusetts and Connecticut are the first two states to mandate auto insurance, followed up by every other state in the following years till present day. Typically, auto insurance became mandatory in most states in the US from 1925 to 1970s and beyond.  

Which US state does not require car insurance?

As of 2025, New Hampshire is the only state in the US that still does not legally require auto insurance. However, you need to have proof of financial security in New Hampshire if you choose not to purchase insurance, either by getting a fixed deposit or by purchasing a bond.  

Is it illegal to not have car insurance in the US?

As car insurance is now mandatory in 49 out of 50 states, it is illegal to own or drive a car without auto insurance. Typically, you cannot register your car at the DMV without having valid auto insurance.

Why is car insurance mandatory in the USA?

In the U.S., car insurance is mandatory to provide financial protection in the event of an accident, ensuring that victims are not burdened with financial losses caused by a negligent driver.