Cash For Clunkers Program Requires Proof Of Insurance

NU Online News Service, June 28, 2:41 p.m. EDT

Some consumers living in states not requiring auto insurance coverage will be unable to secure the government subsidies offered for trading in gas guzzling vehicles for low mileage ones, according to rules released for the program.

One of the rules provisions of the "cash for clunkers" program issued by The National Highway Traffic Safety Administration is that consumers must prove they have had insurance for a year on the car they are replacing.

The program, aimed at helping auto manufacturers sell more fuel-efficient autos and removing gasoline thirsty vehicles from the road, applies to cars or trucks with a fuel-efficiency rating of 18 mpg or less as determined by the Environmental Protection Agency.

Formerly referred to as the Car Allowance Rebate System (CARS), the program limits the age of the vehicle and stipulates it must be in drivable condition. In return, auto buyers will receive either a $3,500 or $4,500 credit for the trade-in depending upon the fuel efficiency of the new car compared to the old one.

Buyers will also have to prove that the car they are trading in is insured for at least one year.

Under the rules the NHTSA is issuing, proof of insurance must consist of one or more insurance identification cards with pertinent vehicle information, including length of time the car was insured; insurance policy documents; or a signed letter with insurance company letterhead from the carrier with necessary information.

"Auto insurers will play an important role facilitating a program which has the potential to remove from America's roadways an estimated 250,000 gas guzzlers, replacing them with newer, more fuel-efficient vehicles," said Robert Hartwig, president of the Insurance Information Institute and an economist, in a statement.

However, the NHTSA recognizes that not all states require drivers to purchase auto insurance, but makes no exception for those without insurance because Congress' intent is clear.

The NHTSA noted that insurance cards in every state are not clear about duration of coverage. It said it consulted with four insurance associations–I.I.I., American Insurance Association, National Association of Mutual Insurance Companies and the Property Casualty Insurers Association of America–to resolve these questions.

The agency said that through the assistance of its members purchasers could contact insurers to obtain proof of insurance "in a form that provides the details needed to identify the insured vehicle and the one-year period of coverage required under the program."

That information will include declaration pages or a letter from the carrier.

"NHTSA demonstrated a high degree of thoughtfulness in crafting this language. By involving the insurance industry on the front end, NHTSA has taken a proactive approach in preventing any confusion or problems after the rules are implemented," said David Snyder, AIA's vice president and associate general counsel, in a statement. "We appreciate working cooperatively with the administration on this important issue and look forward to future opportunities for collaboration."