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Under the Tennessee law, there is no compulsory requirement for licensed drivers and vehicle owners to purchase liability insurance policies. However, the state does implement its financial responsibility law which requires licensed drivers to produce proofs of either liability coverage or deposit of bond with the Department of Safety.

This rule is meant to insure that drivers who figure in automobile accidents have the means to address any expenses resulting from the event, such as paying for medical expenses for injuries, damages, or loss of property. Since 2002, traffic enforcement agents and police officers are required to demand proof of financial responsibility in the event of motor vehicle accidents regardless of who is considered at fault. Any licensed driver who fails to produce proof of insurance or financial responsibility with be imposed with a Class C misdemeanor and fined with $100, as well as have his or her license suspended.

The state of Tennessee also imposes minimum amount limits for required liability coverage. For personal bodily injury of each person involved in the accident, there is the $25,000 limit while total injuries per accident need to have a minimum coverage of $50,000. There is also property damage coverage with minimum limit of $10,000. Individual policyholders may choose to purchase auto insurance policies with higher amounts of coverage but this would result in higher premium rates.

There are also other optional coverage that drivers and automobile vehicle owners may purchase, though these coverage are not exactly required by state law. These include coverage for uninsured and underinsured motorist as well as personal injury protection coverage, among others.

Though most rates of auto insurance premiums are considered to be well below the national average, consumers should know that there still different ways for them to obtain lower auto insurance rates, such as having excellent driving records, having higher deductibles, driving a low-maintenance automobile, and availing of discounts offered by insurance providers.