Financial Responsibility Law

AAA

DEFINITION of 'Financial Responsibility Law'

A law which requires an individual to prove that he or she is able to pay for damages resulting from an accident. A financial responsibility law does not specifically require the individual to have insurance coverage; instead, the law requires the individual to be able to demonstrate the financial capacity to pay, even if the individual is not at fault. This type of law is commonly associated with automobiles.

INVESTOPEDIA EXPLAINS 'Financial Responsibility Law'

Financial responsibility laws exist because not all states have a compulsory insurance law. However, many states consider an individual with an insurance policy to be compliant with a financial responsibility law, since most insurance policies have a minimum coverage that meets the state standard.

RELATED TERMS
  1. Financial Responsibility Clause

    A provision within an automobile insurance policy which indicates ...
  2. Adequacy Of Coverage

    The adequacy of coverage concerns how well your insurance policies ...
  3. Comparative Negligence

    A principle of tort law that applies to casualty insurance in ...
  4. Auto Insurance

    A policy purchased by vehicle owners to mitigate costs associated ...
  5. Insurance Claim

    A formal request to an insurance company asking for a payment ...
  6. Insurance

    A contract (policy) in which an individual or entity receives ...
Related Articles
  1. Options & Futures

    Beginner's Guide To Auto Insurance

    Find the perfect policy that suits both your coverage and budgetary needs.
  2. Options & Futures

    Top Tips For Cheaper, Better Car Insurance

    Accident, theft, vandalism - make sure your coverage will protect you when you need it most.
  3. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  4. Insurance

    The True Cost Of Owning A Car

    Driving is often the most convenient way to get around, but it'll cost you.
  5. Mutual Funds & ETFs

    The Impact of the Janus Market Timing Ruling

    A look at the impact of the Janus Supreme Court ruling on market timing.
  6. Options & Futures

    Get To Know These Crucial US Options Market Regulations

    How are options regulated in the U.S and which organizations are involved in options market regulations?
  7. Economics

    The Impact Of Ending The US Embargo On Cuba

    Many argue that ending the US embargo on Cuba will not only make US consumers happy, but also help the US economy and bring more freedoms to Cuba.
  8. Economics

    Popular Places Where U.S. Citizens Need A Visa

    A U.S. passport will get you into many countries, but not everywhere. Here's how to visit five of the most popular destinations that require visas.
  9. Economics

    Are You the Victim of Unfair Labor Practices?

    If you are a union member, a union leader, or a manager at a company with an established union, you should understand unfair labor practices.
  10. Investing News

    What Affirmative Action Means for Regular Business

    What Affirmative Action means for your businesses today.

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center