Learn about Iowa's motor vehicle financial responsibility law, what insurance coverages you need to have, how to collect compensation if you’re hurt in a wreck, and more.
Iowa, like every state, has a motor vehicle financial responsibility law. That's just a fancy way of saying that if you own or drive a car in Iowa, you'll need proof that you can pay for at least some of the injuries and property damage you might cause in a wreck. If you're like most people, you'll comply with this law by buying an auto insurance policy.
We cover the basics of Iowa's financial responsibility law, starting with a quick introduction to the state's fault-based auto insurance system. From there, we'll walk you through the minimum insurance amounts you must have to satisfy the law, what that insurance covers (and doesn't cover), how you can collect compensation if you're hurt in an accident, and more.
Iowa Is a Fault-Based Insurance State
Like most states, Iowa has adopted what's sometimes called a "fault-based" auto insurance system. Suppose you live in Iowa and you're injured in a collision caused by another driver. Under Iowa law, you can file an insurance claim or a lawsuit against that driver to collect compensation for your injuries (what the law calls "damages").
To win, you must prove that the other driver was at-fault for the accident. Typically, this means showing that the other driver drove negligently, or carelessly. If you succeed, your damages can include (among others) compensation for injuries like emotional distress and pain and suffering.
Iowa's Financial Responsibility Law
If you drive a motor vehicle in Iowa, you must comply with the state's financial responsibility law. (Iowa Code § 321.20B.1.a (2023).) To satisfy the law, you'll need proof that if you cause a wreck, you can pay damages of at least:
- $20,000 for injuries to, or the death of, one person in one accident
- $40,000 for injuries to, or the deaths of, two or more people in one accident, and
- $15,000 for property damages in one accident.
(See Iowa Code § 321A.1.11 (2023).)
You can prove you're able to pay these damages by filing with the Iowa Department of Transportation:
- a certificate of insurance (Iowa Code § 321A.19.1 (2023))
- a surety bond (Iowa Code § 321A.24.1 (2023),) or
- a $55,000 certificate of deposit (Iowa Code § 321A.25 (2023).)
Buying an Auto Insurance Policy
Most drivers choose to buy an auto insurance policy with the minimum coverages required by Iowa's financial responsibility law (described above). Iowa only requires that drivers have auto liability coverage. When you cause an accident, liability insurance pays others for their damages, up to your policy limits. Note, importantly, that your liability insurance doesn't compensate you for your injuries or property damage.
What Damages Are Covered by My Auto Policy?
Your liability insurance covers what the law often calls "compensatory damages," meaning losses attributable to personal injuries and damage to property. Here are some losses that compensatory damages normally cover:
- medical bills
- lost earnings and benefits
- funeral expenses
- pharmacy charges, amounts paid for replacement household services, and other out-of-pocket costs
- amounts you pay to repair or replace damaged property
- emotional distress
- loss of consortium, and
- pain and suffering.
Punitive damages don't compensate for injuries or other losses. Instead, they're designed to punish a wrongdoer and deter others from acting similarly in the future. While you should check the language of your auto policy, odds are that punitive damages are excluded from your coverage.
What Drivers and Vehicles Are Covered Under My Auto Policy?
Your policy covers each person who's named as an insured. Most policies also insure your spouse and other relatives living in your household, together with anyone else you give permission to drive your car.
If you go on a trip and rent a car, or if you take your car in for service and get a loaner, your insurance likely covers the rental or loaner vehicle. Finally, when you trade your car in for a new one, your policy should cover the replacement vehicle for a brief period while you arrange new coverage.
Are Iowa's Minimum Coverages Enough?
Probably not. You need to consider these two questions. First, do I have enough insurance to pay damages to others? Second, do I have insurance to compensate me if I'm hurt in an accident?
Paying Damages to Others
If you're responsible for a collision that causes moderate or severe injuries, you'll burn through Iowa's minimum liability limits ($20,000/$40,000/$15,000) very quickly. Keep in mind that you're on the hook for all damages you cause, regardless of whether you have enough insurance coverage. Talk to your insurance agent about how much liability insurance you need.
Insurance to Get Compensation for Your Own Injuries
How will you be compensated if you're injured in an accident? The answer is likely to depend, at least in part, on who was to blame. If the wreck was the other driver's fault, chances are you'll file a third-party insurance claim or a lawsuit against them to recover your compensatory damages.
But what if the responsible driver is uninsured? Worse yet, what if you're the responsible driver? In either of those situations, you might decide to file a claim under your own auto or other insurance policies. To do that, you'll need to make sure you have the necessary coverages in place. Here are a few examples.
You're hit by an uninsured motorist (UM) or an underinsured motorist (UIM). Give some thought to what you'll do if you're hit by an at-fault uninsured motorist or underinsured motorist. Under Iowa law, every auto liability policy must also have UM and UIM insurance coverages equal to the state's financial responsibility minimums, as discussed above. (Iowa Code § 516A.1.1 (2023).)
But these aren't really required coverages, because the named insured is allowed to reject them, in writing. (Iowa Code § 516A.1.2 (2023).) If you want this insurance, speak to your agent to make sure you haven't unknowingly rejected it.
You need to get your car repaired quickly. Suppose your car is damaged and can't be driven without repairs. If the accident was the other driver's fault, and if that driver is insured, you can collect the repair or replacement cost from their liability insurance.
Here's the problem: It's likely to take some time—time you can't afford to wait—to settle your claims with the other driver's insurance company. Until that happens, your car might have to remain out of commission unless you have some other way to pay for repairs.
If you have optional collision coverage as part of your auto policy, you can get your car fixed or replaced much more quickly. Note that collision insurance is a form of no-fault coverage, so it will cover your auto repairs even if the accident was your fault.
You have health insurance that will pay your medical bills. If you have a health insurance plan, you can almost certainly submit your medical expenses for payment or reimbursement under that policy. Once you settle with the responsible driver, your health insurer likely will expect to be reimbursed for any amounts it paid.
Failure to Comply With the Financial Responsibility Law
What happens if you're caught driving without auto insurance (or other proof of financial responsibility) in Iowa? The police officer who stops you can:
- issue a warning
- issue a citation
- issue a citation and remove your vehicle's license plate and registration, or
- issue a citation, remove your vehicle's license plate and registration, and impound your vehicle.
(Iowa Code § 321.20B.4.a (2023).)
Here's where things start to get expensive. The fine for driving without insurance is $325, if you didn't cause an accident. When you cause an accident, the fine is $645. (Iowa Code § 805.8A.14.f (2023).) You'll have to pay an administrative fee ($15) to the county treasurer to get new license plates if your original plates were removed. If your car was impounded, you must pay the towing and storage charges (likely several hundred dollars) to get it back.
If you cause an accident that results in personal injuries or property damages of more than $1,500, your driver's license and vehicle registration will be suspended if you can't post security to cover the estimated damages. (Iowa Code § 321A.5.1 (2023).) The suspension will last for a year unless you're able to post the necessary security. (Iowa Code § 321A.7 (2023).) Driving while suspended is a misdemeanor. (Iowa Code § 321A.32.1 (2023).)
On top of everything else, you still need to comply with Iowa's financial responsibility law. Needless to say, your auto insurance premiums are likely to increase substantially.
Get Help With Your Iowa Car Insurance Questions
While Iowa's financial responsibility requirements are fairly straightforward, insurance coverages are a different matter. Understanding what insurance you need, and how much you need, can be confusing and difficult. If you have questions about your auto insurance situation, your best bet will be to speak with your insurance agent or your attorney. They can explain the coverages, and the coverage amounts, that are best for you.
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