3.1 Illinois Auto Insurance Requirements

Mandatory Liability Coverage

The Illinois Mandatory Insurance Law (625 ILCS 5/7-601) requires every registered motor vehicle to carry liability insurance. The statutory minimum financial responsibility limits are written as 25/50/20:

These amounts are unchanged through 2026. Read the first number as the most paid to any one injured person, the second as the total BI cap for all people in one accident, and the third as damage to others' property. A producer who quotes 15/30/10 or 30/60/25 has used another state's numbers — the Illinois exam tests the exact 25/50/20 figures.

Proof and Electronic Verification

Drivers must carry proof of insurance — a physical or electronic insurance card showing the insurer, policy number, and effective dates. Illinois enforces this through the Illinois Insurance Verification System (ILIVS), run with the Secretary of State (SOS):

• Insurers report active policies electronically; records link to vehicle registration.
• The SOS mails random verification questionnaires; failure to respond is treated as no coverage.
• A confirmed lapse leads to license-plate (registration) suspension.

Reinstatement penalties escalate: a first offense carries a $100 reinstatement fee plus a minimum $500 fine; a repeat lapse within a set period raises the reinstatement fee to $500 and may require an SR-22. Driving while the plates are suspended for non-insurance carries its own penalties.

Fault System: Modified Comparative Negligence

Illinois is a fault (tort) state — the at-fault driver's liability coverage pays the other party. Fault is allocated using modified comparative negligence with a 50% bar (735 ILCS 5/2-1116):

• A claimant's recovery is reduced by their own percentage of fault.
• A claimant who is more than 50% at fault recovers nothing.

Trap: Illinois bars recovery at more than 50%, so a plaintiff exactly 50% at fault still recovers (reduced by half). Some states use a 51% rule; do not confuse the statutory language with a flat "50% and you lose" shortcut.

Worked example

Driver A has $40,000 in damages and is found 30% at fault; Driver B is 70% at fault.

• Driver A recovers $40,000 × (100% − 30%) = $28,000.
• If Driver A had instead been 55% at fault, the 50% bar applies and Driver A recovers $0, even with real damages.

Uninsured and Underinsured Motorist Coverage

Illinois requires Uninsured Motorist (UM) bodily injury coverage on every auto policy at minimum limits equal to liability — 25/50. UM pays your insured when an at-fault driver has no insurance or is a hit-and-run.

Underinsured Motorist (UIM) works differently. Illinois requires UIM only when the policyholder chooses liability limits higher than the 25/50 UM minimum; UIM must then match those higher BI limits. UIM pays the gap between the at-fault driver's inadequate limits and your UIM limit.

Exam tip: UM is always mandatory; UIM only kicks in once the insured buys higher limits. An applicant can lower UM/UIM toward the minimum only with a written, signed selection — never by silence.

SR-22 Financial Responsibility Filing

An SR-22 is not an insurance policy. It is a certificate the insurer files with the SOS proving the driver carries at least the 25/50/20 minimum. It is required after events such as:

Key rules a producer must convey:

• The filing must usually be maintained for 3 years.
• If coverage lapses or cancels, the insurer must notify the SOS, which triggers suspension.
• An SR-22 generally raises premium because it flags a high-risk driver.

Rating: File-and-Use and Prohibited Factors

Illinois regulates auto rates under a file-and-use system — insurers file rates with the Department of Insurance (DOI) and may use them, subject to later review for adequacy and unfair discrimination.

Permitted rating factors include driving record, annual mileage, vehicle type, territory, and credit-based insurance scores (within limits). Prohibited: unfair discrimination based on race, religion, or national origin, and refusing to renew solely because of age or a single claim. Rates may not be inadequate, excessive, or unfairly discriminatory.

Optional Physical Damage and Med Pay

Illinois law mandates only liability and UM/UIM. The following are optional but heavily sold, and producers must explain them:

Med Pay is important on the exam because Illinois is a tort state, not a no-fault state — there is no statutory Personal Injury Protection (PIP). Med Pay fills part of that gap on a no-fault basis but is purely optional. A common distractor claims Illinois "requires PIP" or is a "no-fault state"; both are false. Comprehensive and collision are usually required by lienholders, not by Illinois law, and each carries a deductible the insured chooses.

Cancellation and Nonrenewal Notice

Illinois restricts how quickly an auto policy can be terminated. After a policy has been in effect 60 days, an insurer may cancel only for specific reasons (nonpayment, license suspension, fraud, material misrepresentation). The insurer must give the insured advance written notice — generally 10 days for nonpayment and 30 days for other reasons — and a similar 30-day notice for nonrenewal. These notice rules protect consumers from abrupt loss of mandatory coverage.