In the US state of Virginia, like in most countries/states in the world, liability insurance is mandatory for (drivers of) motor vehicles. However, unlike other countries, it is allowed to drive without liability insurance by paying an Uninsured Motor Vehicle fee of $500 per year:

Uninsured Motor Vehicle Fee

The Virginia Uninsured Motor Vehicle (UMV) fee allows a motor vehicle owner to register an uninsured motor vehicle. At the time of registration, the motor vehicle owner must certify whether the vehicle is insured or uninsured.

If the vehicle is uninsured, the motor vehicle owner is required to pay to DMV a $500 uninsured motor vehicle fee in addition to normal registration fees. Payment of the $500 fee does not provide the motorist with any insurance coverage. [...]

Uninsured Motor Vehicle Fee, Virginia Department of Motor Vehicles

Note that the payment is not just a penalty for being uninsured - after paying it, you are actually allowed to drive without liability insurance (though you will have to pay any accident damages yourself).

This does not make sense to me. Why would one require liability insurance, but then allow people to opt out? The goal of mandatory insurance is that accident victims get their compensation - if you allow opt-outs chances are that drivers who opt out are mostly drivers with little money or high accident risk, so precisely those where having insurance is most important.

I can understand not requiring insurance at all (based on the idea that government should not interfere), but requiring insurance and allowing an opt-out seems pointless.

So what is the rationale / background for this policy? Did any lawmaker go on record explaining the motivation?

  • 3
    First thing to check is whether you're allowed to actually drive an uninsured car or you're just being allowed to register the car so you can keep your plates.
    – pboss3010
    Dec 18, 2018 at 13:09
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    Are you looking for theoretical reasons or statements by people who actually voted on the rule explaining their vote?
    – user4012
    Dec 18, 2018 at 14:09
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    In case that an uninsured driver causes an accident and is unable to cover the damages, does the state of Virginia pay them (totally or partially). IOW, is the state acting as a last resouce insurer?
    – SJuan76
    Dec 18, 2018 at 14:11
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    Just guessing, but the state may not have the power to actually force anyone to get cover, but may have the power to tax the uninsured. Similar to the “Obamacare” individual mandate.
    – chirlu
    Dec 18, 2018 at 15:10
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    @chirlu considering most states have laws requiring your car to be insured to get registered and give tickets for driving without proof of insurance coverage I am not sure that is the case. Though in most cases it is a fix-it ticket meaning that you can show proof of insurance coverage afterwards to get out of the ticket.
    – Joe W
    Dec 18, 2018 at 18:21

2 Answers 2


Answering my own question after four years...

It seems I am not the only one who questioned this regulation. In March 2023, Senate bill SB 951 was signed into law, which abolishes the "Uninsured Motor vehicle fee":

SB 951

Repeals the option to register an uninsured motor vehicle upon payment of the uninsured motor vehicle fee of $500. The repeal has an effective date of July 1, 2024. [...]

So, my question is now moot.

As to the original intent behind the rule, an article in Repairer Driven News sheds some light:

Virginia is among two states (New Hampshire is the other) that don’t require vehicles to carry liability insurance as long as drivers pay a $500 uninsured motor fee.

The surcharge does not provide drivers with any coverage. It goes into a special fund for insurance companies whose policyholders were injured or their vehicles damaged by an uninsured driver.

Senate bill would require auto liability insurance in Virginia

As this page from the VA DMV explains, the fund was paid out to insurers who offered uninsured motorist insurance, in proportion to the premiums they took in, so it compensated them for their expenses and payouts, not the drivers. Drivers who made the payment were still liable for lawsuits so it didn't provide any insurance against being sued or coverage against expenses from legal action.

So the idea seemed to be that drivers could opt out of liability insurance, and the fee would then support insurance companies which offer uninsured motorist coverage, in the hope that most victims of such uninsured drivers have uninsured motorist coverage themselves.

Of course, if you did not purchase uninsured motorist coverage, you were out of luck. That makes the system inferior to just requiring liability insurance, and I suppose that was one reason why the system was abolished

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    "replacement for liability insurance that only protects the victims" - but isn't that the whole point of liability insurance ("3rd party insurance"): to protect the victims? If one has liability [only] insurance, one doesn't have "protection for themselves" by definition. If, under that defunct legislation, a special fund covers the victims, it then acts like liability insurance. Except, perhaps, it doesn't prevent from claims for damages, but then $500/year sounds like a reasonable (or even high) premium for "proper" car liability insurance...
    – Zeus
    Jun 16, 2023 at 7:19
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    @Zeus: Liability insurance also protects the policy holder - it protects them from having to pay for the damages they caused. It's not clear how the fund in Virginia worked, but if it cannot cover the damage in full, the guilty driver was probably still on the hook - thus no "protection" for the driver / policy holder.
    – sleske
    Jun 16, 2023 at 9:54
  • Maybe my answer was a bit unclear. Edited to clarify.
    – sleske
    Jun 16, 2023 at 9:59
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    This page from the VA DMV says the fund was paid out to insurers who had to cover losses from accidents caused by uninsured drivers, so it compensated them for their expenses and payouts, not the drivers. Drivers who made the payment were still liable for lawsuits so it didn't provide any insurance against being sued or coverage against expenses from legal action. It allowed drivers to insure themselves while reimbursing insurance companies.
    – Stuart F
    Jun 16, 2023 at 10:30
  • @StuartF: Thanks for finding the links. So that means there was no direct compensation to victims from the fund, it was a subsidy for insurance companies. And uninsured drivers would be fully liable for any damages they caused - thus the fee provided no protection to them like a liability insurance would.
    – sleske
    Jun 16, 2023 at 12:37

I think we can understand this odd rule by looking at who wins and loses here. While risk-averse Virginian drivers would like everyone to carry insurance, the fee privileges others to avoid buying it. The constituency that benefits from paying this fee instead of buying (presumably more expensive) insurance has both an optimistic belief they won't get into accidents and a low income; those are the people the rule is written to benefit. Representatives that vote for such a law do so to support the interests of their constituents pinched the most by the cost of liability insurance. Another state with an uninsured motor vehicle fee is South Carolina.

  • "Representatives that vote for such a law do so to support the interests of their constituents pinched the most by the cost of liability insurance" - that does not quite make sense to me. If you want to allow people to drive without liability insurance, just drop the insurance requirement. But having a requirement and then allowing people to get around it seems pointless. Why keep the requirement at all?
    – sleske
    Feb 6, 2019 at 8:31
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    I can only offer that law is made from realpolitik, not good sense. Feb 8, 2019 at 0:04
  • In theory it allows the wealthy to insure themselves by paying for any losses out of their own money (the minimum legal requirements for third party insurance were formerly only $60,000 per accident for medical bills plus $20,000 for property damage, so a moderately wealthy person could cover that - although it might not be enough in practice). In practice, it allowed people who had no money and would otherwise face high insurance rates (because they were bad risks) to avoid getting insurance. Not good.
    – Stuart F
    Jun 16, 2023 at 10:36

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