Final answer:
Yes, it is true that most states require drivers to purchase a minimum amount of liability insurance. The statement is true.
Step-by-step explanation:
It is true that most states have financial responsibility laws that require individuals who drive cars to purchase a minimum amount of liability insurance. These laws help ensure that all drivers can cover the costs of damages and injuries in the event of an accident.
This requirement is part of a common government intervention in the insurance market to prevent a situation known as adverse selection, where insurance companies would otherwise set their prices higher due to only high-risk individuals buying insurance.
By mandating insurance, states can facilitate a more balanced insurance pool, even though insurance companies may still avoid selling to those considered high-risk whenever possible.
Additionally, the intervention regulates the market by having those with lower risks subsidize those with higher risks to some degree. However, if states set very strict rules on keeping premiums low, insurance companies might choose to withdraw from the market, as seen with some companies in New Jersey and Florida.