Financial Responsibility Law
Definition - What does Financial Responsibility Law mean?
The financial responsibility law requires people to prove that they have the financial means to cover potential damages for losses related to a particular risk. Proof of financial means is often required for uninsured drivers in places where auto insurance is not required by law. This is because auto accidents can result in significant losses, and if the person at fault can't cover these losses, then the injured party could experience a major financial setback.
Insuranceopedia explains Financial Responsibility Law
Auto insurance typically allows a person to comply with financial responsibility laws in lieu of providing proof of financial means to cover accident-related damages.This is because the amount of coverage that auto insurance provides is usually enough to meet state minimum requirements. Buying auto insurance is often very financial practical for drivers because it prevents them from having to shoulder the full cost of losses themselves, while also allowing them to comply with financial responsibility laws.