When Did Car Insurance Become Mandatory?

From the history of Car Insurance to where to buy it online: Everything you need to know!

Car Insurance History

The first ever road accident was reported back in 1896 in New York City, when a car driver hit a bicyclist. The car driver spent the night in jail and the bicyclist went home with a broken leg: a loss for both people.

Imagine if they had car insurance. Not only would they have been able to pay for medical expenses but also the damage done to their vehicles.

Some corporate sectors understood this need and thought there should be a middle ground for both entities if they were ever met in a collision.

So two years later, the first auto insurance was sold.

Sold by Traveler’s Company, the first insurance was marketed in 1898- and that too for a very cheap rate at $12.25. Crazy right? Because today on average an insurance costs more than $900!

And then, the government decided to make it mandatory because having your car insured was extremely important to cushion people with their financial blows.

But when did it become mandatory?

The year was 1927, when Massachusetts was the first state to deem car insurance mandatory, and until 1957 it was the only state. However, before car insurance was mandatory, many states had proper licensing rules and regulations that drivers had to follow to drive the car legally on the road: no road violations, no DUI charges, clean driving record, age appropriate etc.

Now that we’re a little clear on the history, let’s see what car insurance is.

What is Car Insurance?

Car insurance is a type of protection given to you and your vehicle if you choose to be insured. What is important to note here is that there are certain things that are covered under the insurance, but some aren’t.

For however long you choose your protection plan to be, you have to keep paying premiums monthly or annually to keep the policy in force.

Full Coverage Car Insurance

  • Liability: Any harm that you have done to someone else’s property or vehicle will be covered under this policy.
  • Medical: Injuries or treatment required as a result of the accident will also be covered. You and the other driver will be given medical expenses to pay to the hospital.
  • Legal: If someone sues you for destroying their property or assets as a result of the accident, you will be given coverage to go through the legal cost and also hire a lawyer.
  • Personal damage: You will also be covered for any repair expenses for damages done to your car, or if your car is stolen, the insurance company will also cover those charges.
  • Comprehensive: If your car is damaged as a result of vandalism or animal accidents.
  • Collision: Any expenses that YOU have to bear because of the accident; like if you hit another car or an object on the road, the expenses associated with your car only will be covered under collision.

First Time Car Insurance

For new drivers looking for a first time car insurance can be a real deal. Since you don’t have experience in driving or you recently just learned driving, you are more likely to cause an accident. And the insurance company can see that.

This is also why first time drivers will pay more for insurance!

But that doesn’t mean you wouldn’t get insurance, shop around and you will find a cheap package for yourself. And don’t go for full coverage initially- if you’re a careful driver yourself, you don’t need full insurance. This way you won’t have to pay higher premiums.

Even if you’re not a new driver and it’s your first time buying car insurance, you will be asked some personal questions like your age, marital status, valid driver’s license, any previous insurance history (health or life) etc. This way the insurance company will be able to create a proper package for you and that too with affordable premiums.

Company wise Car Insurance Quotes for experienced and inexperienced drivers

 

Insurance Company No experience 15+ years of experience
AllState $3,365 $1,387
State Farm $3,523 $1,663
Progressive $4,891 $1,422
GEICO $6,339 $1,238

Note: Sample rates have been extracted online, courtesy of ValuePenguin.

As you can see, the rates have spiked up really high for drivers with no experience, because new drivers are a risk to be investing in. And top insurance companies understand this!

Buy Car Insurance Online

Now that you’ve probably decided that you need auto insurance to drive legally in the country, the next step is to look for options. But first let’s see what annual insurance rates are for each State.

Car Insurance Rates by State:

 

State Average Car Insurance Premium (Annual)
Alabama $1,439
Alaska $1,242
Arizona $1,543
Arkansas $1,459
California $1,647
Colorado $1,915
Connecticut $1,781
Delaware $1,970
District of Columbia $1,715
Florida $2,007
Georgia $1,942
Hawaii $1,324
Idaho $1,122
Illinois $1,335
Indiana $1,166
Iowa $1,100
Kansas $1,313
Kentucky $1,863
Louisiana $2,480
Maine $1,510
Maryland $1,463
Massachusetts $1,385
Michigan $3,343
Minnesota $2,040
Mississippi $1,450
Missouri $1,560
Montana $1,498
Nebraska $1,355
Nevada $1,855
New Hampshire $1,451
New Jersey $1,756
New Mexico $1,608
New York $1,894
North Carolina $1,316
North Dakota $1,178
Ohio $1,249
Oklahoma $1,465
Oregon $1,598
Pennsylvania $1,414
Rhode Island $2,018
South Carolina $1,706
South Dakota $1,399
Tennessee $1,365
Texas $1,699
Utah $1,606
Vermont $1,207
Virginia $1,127
Washington $1,106
West Virginia $1,410
Wisconsin $1,241
Wyoming $1,246

 

Car Insurance Rates by Companies:

This is a comparison of the different companies and their rates for a full coverage and minimum coverage auto insurance.

Company Full coverage Minimum coverage
Geico $1,198 $478
American Family $1,233 $601
Nationwide $1,349 $682
State Farm $1,511 $624
Travelers $1,528 $815
Progressive $1,766 $774
Liberty Mutual $1,778 $900
Allstate $1,834 $784
Farmers $1,865 $926

Note: Sample rates have been extracted online, courtesy of NerdWallet.

Conclusion

Ever since 1927 when car insurance was made mandatory, every citizen who owns a car or drives a commercial car needs to get it insured. Driving an uninsured car even for a yard is illegal and if caught, your license could be confiscated, inviting severe consequences.

Whether you’re a new driver or not, insurance is important for you. And with that, a cheap insurance package is what you need. The best way to do that is shopping around for appropriate insurance leads before buying an insurance plan.

Nabeel Ahmad

Nabeel Ahmad

Nabeel Ahmad is the founder and editor-in-chief of Insurance Noon. Apart from Insurance Noon, he is a serial entrepreneur, and has founded multiple successful companies in different industries.

Leave a Reply

Insurance Noon is the world's leading source of insurance related content on the web, focusing on industry news, buying guides, reviews, and much more.