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?

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    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 '18 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 '18 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 '18 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 '18 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 '18 at 18:21

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 at 8:31
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    I can only offer that law is made from realpolitik, not good sense. – Aaron Brick Feb 8 at 0:04

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