In the United States and most of the world, drivers are required by law to demonstrate their financial responsibility in the event of being involved in an automobile accident. Most states require drivers to purchase car insurance to meet this requirement.

Before the Laws

When car accidents first began occurring, they were dealt with as part of the tort system meaning fault was determined and the at-fault party became responsible for the damages. However, not all at-fault parties could afford to pay for the damages.

First Laws

In 1925, Connecticut and Massachusetts became the first states to require drivers to demonstrate financial responsibility. Of the two, Massachusetts was the only one to require the purchase of auto insurance.

Expanding Laws

Until the mid-1950s, Massachusetts was the only state requiring car insurance to be purchased. After that time, New York and North Carolina joined them. By the 1970s, most states had passed similar laws.

Minimum Coverage

In the majority of states, car insurance laws require the purchase of a minimum amount of liability coverage. Coverage amounts are written as three numbers, such as 20/40/15 (Iowa) or 50/100/25 (Alaska). The numbers stand for bodily injury liability per person; bodily injury liability per accident; and property damage per accident.

No Fault Laws

In 12 states, no fault car insurance laws have passed. Under this law, personal injury costs associated with an accident are paid through one's own insurance (called PIP or personal injury protection) and lawsuits for these expenses are limited or prohibited altogether.

Source:

Ampm Insure: State-wise Information on Auto Insurance

Legal Advice: Fault and No-Fault Car Accidents: Who Pays the Bills?

drbilllong.com: Automobile Insurance - A Brief History