What are 'financial responsibility laws' in the context of auto insurance?

Financial responsibility laws are state laws requiring drivers to be able to pay for bodily injury and property damage they may cause in an auto accident. Most commonly, drivers satisfy these laws by carrying at least the state-mandated minimum liability insurance, though some states allow alternatives like posting a bond or deposit. Drivers may have to show proof of financial responsibility (such as proof of insurance) at registration, after an accident, or when cited. The required minimum limits vary by state. Understanding financial responsibility laws — and that minimums vary by state — is standard regulations content on the casualty exam.