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DMV Permit · Insurance

Why are drivers generally required to carry liability insurance (or proof of financial responsibility)?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

To ensure that a driver who causes a crash can pay for resulting injuries or property damage to others

  1. A To ensure that a driver who causes a crash can pay for resulting injuries or property damage to others
  2. B Only luxury cars need insurance
  3. C Insurance is optional everywhere
  4. D To increase costs for no reason

Why this is the answer

Most states require drivers to carry liability insurance, or otherwise demonstrate financial responsibility, so that if a driver causes a collision, there are funds to pay for the injuries and property damage suffered by others. Liability coverage protects victims and the at-fault driver from catastrophic out-of-pocket costs. Driving without required insurance can lead to fines, license suspension, and personal liability for damages. Minimum coverage amounts and rules vary by state, and drivers usually must carry proof of insurance and show it when requested. Understanding the purpose of mandatory insurance is part of the license-and-insurance rules of the road.
Source: State driver handbook, Financial Responsibility

Practice more questions

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About this topic: Insurance

Insurance questions cover the minimum liability coverage your state requires, proof of financial responsibility, and the consequences of driving uninsured. This is one of 3 Rules of the Road questions on insurance, each with a full explanation on a single study page.

New to this exam? Our DMV Permit exam guide explains the format, scoring, and how to prepare.

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State-specific guides

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