South Dakota operates under a financial responsibility law which requires drivers and vehicle owners to provide proof that they have the ability to be financially responsible if they are found to be at-fault in an accident involving one or more other drivers. For a majority of South Dakota residents the easiest way to prove financial responsibility is to purchase an auto insurance policy that meets the minimum requirements set by the state. As an at-fault sate the car insurance requirements established by the state of South Dakota consist of a liability policy with at least $25,000 for a single individual and $50,000 for a single accident in bodily injury liability coverage in addition to $25,000 in property damage liability coverage. Liability insurance is intended to be used in a situation where the policy holder’s driving has resulted in injuries to others or damage to their property for which they would be financially liable. Instead of paying for injuries or damage out of pocket, which can place an incredible financial burden on the policy holder and result in potential lawsuits, the car insurance company will pay for injuries and property damage up to the amounts established in the policy.
In addition to liability insurance the state of South Dakota also requires every vehicle registered with the state to be covered with uninsured and underinsured motorist coverage. The minimum amount of uninsured and underinsured motorist coverage required for a vehicle to be legal is $25,000 in per person and $50,000 per accident in bodily injury coverage. Uninsured motorist coverage, as its name suggests, is designed to help prevent the policy holder from having to take on the financial burden of an accident if the at-fault driver does not have liability insurance to pay for the policy holder’s injuries or property damage. Although an at-fault driver would still be financially liable for the costs of an accident even if they are uninsured, unless they willingly hand over the money to cover the costs of an accident it would likely be necessary to take them to court and sue for damages; an expensive option in of itself. Uninsured motorist coverage on the other hand is only designed to be used if the at-fault driver’s liability insurance does not completely cover the costs of injuries to the policy holder or passengers in the policy holder’s vehicle that were the result of the accident. If an at-fault driver only has the minimum of $50,000 in bodily injury coverage per accident and the total costs of injuries to other parties is more than $50,000 any driver that has underinsured motorist coverage can use the insurance to make up the difference. South Dakota car insurance law dictates that uninsured and underinsured motorist coverage never be carried in amounts that exceed the amount of bodily injury liability coverage purchased.
If a South Dakota resident does not wish to purchase an insurance policy in order to satisfy the state’s financial responsibility requirement they always have the option of obtaining a certificate of deposit from the State Treasurer’s office. To obtain a certificate of deposit a vehicle owner must deposit $50,000 in cash or securities with the State Treasurer’s office in order to show that they have the assets to be financially responsible if they are involved in a car accident and are held liable for the costs. Other drivers may not purchase an auto insurance plan that meets state requirements simply because they cannot find a company that will voluntarily write them a policy due to a tarnished driving history that makes them an unacceptable risk. Drivers in this position can apply to the South Dakota Automobile Insurance Plan and if accepted they will be paired with an insurance agency that will be required to write them a policy for at least three years. After three years if the driver still cannot find a policy voluntarily they can reapply for readmission into the program. In addition to requiring car insurance companies to insure certain South Dakota residents through the South Dakota Automobile Insurance Plan the state also regulates when and for what reason a policy can be cancelled. Auto insurance companies are generally allowed to cancel a car insurance policy for any reason, or no reason at all, within the first 60 days of the policy’s activation. After the first 60 days the insurance company is only allowed to cancel the policy if the policy holder fails to pay the premiums or if they lose their drivers license. When it comes to policy renewal insurance companies have a bit more freedom to decide if they want to continue to insure a policy holder. When a policy comes up for renewal South Dakota car insurance companies can choose to not renew the policy for a variety of reasons, including recent traffic accidents or driving violations.