A short history of car insurance in the U.S.

If you own a vehicle, you’re probably required to carry a minimum amount of car insurance. The first U.S. car insurance policy dates back to the late 1890s, but the concept of insurance was created long before that. In the early days, cars were a luxury and insurance was an afterthought. Today, America runs on automobiles, and car insurance is a necessity.

When was car insurance first offered in the U.S.?

Although the first automobile was invented in 1886 by Carl Benz, a German engineer, cars did not begin appearing on roads in the U.S. until the end of the 19th century. The first car insurance policy in the U.S. was issued by Travelers Insurance in 1897 to Truman Martin, a doctor from Buffalo, New York.

The policy carried $5,000 in liability coverage, equivalent to about $189,000 today. Compared to a standard liability car insurance policy today, which may offer up to $500,000 or more in coverage. Martin’s insurance premium cost only $12.25 or roughly $316 today, according to Insurance Journal.

When Martin bought his policy, there were only a few thousand cars in the U.S. But over the next few decades, car ownership would skyrocket with the introduction of vehicles like Henry Ford’s Model T and Model A. More vehicles on the road led to more accidents, prompting lawmakers to take action.

“States started to require mandatory liability coverage during the 20th century,” said Katherine Hempstead, author of the book, “Uncovered: The Story of Insurance in America,” and a senior policy advisor at the Robert Wood Johnson Foundation. “Massachusetts was the first state to mandate car insurance in 1926, and other states added that requirement over time.”

Insurers weren’t thrilled at first. “The insurance industry initially opposed mandating auto insurance because they thought they would be pressured to cover almost everyone,” she said.

How has car insurance changed over the years?

Car insurance has changed significantly since the first policy was sold 126 years ago.

“Auto insurance started out as a complicated product where consumers needed to buy five or more policies to protect against all of the property and liability risks,” Hempstead said. “It wasn’t until the mid-20th century that there was a standard comprehensive policy.”

In 1945, the McCarran-Ferguson Act enabled states to regulate car insurance. And around this time, carriers started covering more financial risks.

“Between the 1930’s and 1950’s, car insurance coverage grew to include collision, comprehensive, and uninsured motorist protection,” said Siwei Gao, professor of insurance studies Eastern Kentucky University.

In 1971, Massachusetts became the first state to establish no-fault car insurance, which limited drivers’ ability to sue other drivers after an accident. Currently, 12 states have mandatory no-fault car insurance laws.

“Through the 1960’s and 1980’s, no-fault insurance laws came into play, and policies became more standardized. States also started regulating rates to ensure fairness,” Gao said.

The insurance industry underwent major technological advances in the 1990’s and early 2000’s.

“The internet revolutionized how insurance was bought. Usage-based insurance became prominent, and insurers started using telematics to set premiums. Mobile apps and better fraud detection emerged. Insurtech innovations in the 2010’s also brought personalized, app-based policies, like pay-per-mile insurance,” Gao said.

Today, major national and regional insurance companies provide online quotes, online sales, and digital tools for policy management and claim handling.

How old are the largest insurance companies?

Travelers, which sold the very first car insurance policy in the U.S., is also the oldest car insurance company. It was founded in 1864. Most of the other biggest insurance companies, like State Farm and USAA, were founded in the early 1900s.

Here are the largest car insurance companies by market share and the year they were founded.

How much does car insurance cost today?

These days, the average cost of car insurance is significantly higher than it was back when Travelers sold its first policy to Truman Martin. But auto insurance – and automobiles – have changed a lot since the 1890s.

In 2024, the average American pays $1,897 per year for full coverage. But car insurance premiums are different for every driver. Some of the factors that impact auto insurance rates are location, age, gender, credit score, vehicle type, and driving record. Additionally, insurers charge different rates for the same coverage.

The rates below were collected from auto insurance comparison site CarInsurance.com and its data partner Quadrant Information Services for single, 40-year-old male and female drivers of a 2023 Honda Accord LX with a good insurance score and no violations on their record for full coverage insurance policy with liability limits of 100/300/100 and a $500 comprehensive and collision deductible.

Car insurance fun facts

Many well-known insurance companies have a unique history. Here are some fun facts about popular car insurance carriers.

Allstate

Allstate issued its first car insurance policy for a 1930 Studebaker with an annual rate of $41.60. Its first claim was filed when a customer visited Allstate’s Chicago headquarters with a door handle that had been ripped off the vehicle in an attempted theft.

USAA

USAA was founded in San Antonio in 1922 by 25 Army officers who decided to self-insure each other's vehicles. The company grew steadily through the Great Depression, and during World War II, USAA automatically renewed car insurance policies for customers who were deployed overseas.

Farmers

Los Angeles-based Farmers was one of the only insurance companies during the Great Depression to settle claims in cash rather than write an IOU. When a major hurricane struck the Los Angeles area in the 1930s, Farmers executives decided to cover customers’ damaged vehicles, making it the first company to offer comprehensive car insurance.

Geico

Geico stands for Government Employees Insurance Company. The company got its name because its early customer base was U.S. government employees and military service members.

State Farm

State Farm was founded by a farmer who believed other farmers were charging too much for insurance in Illinois. He started State Farm to provide more affordable insurance to farmers like himself. In 1928, State Farm began selling insurance policies to non-farmers.

Frequently asked questions

What is the oldest insurance company in the U.S.?

The oldest insurance company in the U.S. is the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire, founded in 1752. The company was founded by Benjamin Franklin and a group of firefighters he worked with as a mutual insurance company to protect policyholders in the event that their dwelling burned. Initially, policies were available in seven-year renewal terms and only covered the physical structure of the building. Today, the company specializes in residential and commercial property insurance.

When was insurance invented?

Historical accounts differ, but insurance has existed since at least the 17th century. In 1601, the City of London adopted the Merchant Assurance Act, the first recorded law addressing policy law and dispute resolution.

How many states require insurance?

Car insurance is a legal requirement in 49 states and Washington D.C. All of them require drivers to obtain a minimum amount of bodily injury and property damage liability insurance, although coverage amounts vary. The only state that doesn’t require traditional car insurance is New Hampshire. However, drivers who choose to purchase car insurance in New Hampshire must carry a minimum amount of liability coverage.

Prior to 2024, Virginia also didn’t require car insurance, but a law was recently passed mandating auto insurance in the commonwealth. To meet Virginia’s financial responsibility laws, drivers can also file a surety bond or certificate of self-insurance, or put down a deposit with the DMV.

Methodology

Editors collected rate information from auto insurance comparison site CarInsurance.com and its data partner Quadrant Information Services for single, 40-year-old male and female drivers of a 2023 Honda Accord LX with a good insurance score and no violations on their record for full coverage insurance policy with liability limits of 100/300/100 and a $500 comprehensive and collision deductible.

In addition, we also calculated rates for these same hypothetical drivers, but with one or more of the following on their record: speeding ticket, at-fault accident, DUI/DWI, poor credit history, or a lapse in coverage.

We analyzed more than 53 million quotes, more than 34,000 ZIP codes and 170 insurance companies nationwide.

Note: 100/300/100 means up to $100,000 for the medical bills of those you injure, up to $300,000 per accident for bodily injury liability for all persons injured in one accident, and $100,000 to repair other drivers’ cars and property that you damage.