Why do I need car insurance?

Not only is car insurance a legal requirement in most states, but it also protects your financial interests. The average liability rate in the U.S. is $538.73.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Jul 16, 2021

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Things to Remember...

  • Most states make having current auto insurance a legal requirement
  • Not having car insurance can lead to legal and civil penalties, as well as severe financial consequences
  • Lease companies and lenders require their customers to keep their auto insurance current
  • You can make coverage more affordable by shopping for the best rates

You may wonder each month as you pay your bills why you have to have auto insurance. You can see the tangible results of paying your telephone, cable, and utility bills. However, you don’t have much to show for paying your car insurance premiums every month.

What people don’t usually stop to appreciate is the importance of their auto insurance and how lucky they are if they haven’t had to get their money’s worth out of it. In most states, having auto insurance is a legal requirement.

If you want to find out if you are paying a fair price for your insurance premiums, you can go online and use a price comparison tool. Start comparing auto insurance rates now by using our FREE tool above!

Why auto insurance?

In general, all drivers need car insurance. Although paying auto insurance each month or every six months and not seeing any tangible evidence of what you are paying for can become quite irritating, especially if your budget is already tight, you do benefit from this type of insurance.

The importance of having car insurance can be broken down into three main factors:

  • Car insurance is a legal requirement in most states
  • Car insurance protects your financial interests and assets
  • Car insurance is a required part of leasing a vehicle and an obligation to your lender if your car is not paid off

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Auto Insurance is a Legal Requirement

In the majority of states, drivers are legally required to maintain insurance on their vehicles. The only exception is in the state of New Hampshire, where drivers are not legally required to carry auto insurance.

In New Hampshire, however, drivers are required to show financial ability to pay for damages that they could cause in an accident. Obtaining and keeping your car insurance current is a legal requirement as it protects your interests and the interests of your fellow drivers on the road.

Driving without the legal protection of insurance is a risky business. While penalties and consequences can vary from one state to the next, drivers can face a multitude of serious and costly consequences if they are caught driving without being covered by an auto insurance policy.

Such penalties can include:

  • Having your driver’s licenses legally suspended
  • Suspension of your vehicle registration
  • No insurance traffic violation
  • Steep fines, up to and over hundreds of dollars
  • Having to meet SR-22 insurance requirements

In order to get your license back and reinstate your car registration, you will be required to pay hefty fines and fees that can also add up to hundreds, or even over $1,000.

If you are caught driving on a suspended license or with suspended vehicle registration, you can face even more grave consequences and higher fines and fees. Each state has different laws and requirements, so be sure to check the laws in your area to find out more.

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Other Consequences for not Having a Current Insurance Policy on Your Vehicle

In addition to the legal penalties and fines you will face if you drive without having active car insurance, there are other consequences you may have to face.

If you are in an accident while not covered by an auto insurance policy, the fallout can be even more costly and even lead to civil penalties.

If you are in an accident and only cause injury or property damage to yourself or your own property, you are left to deal with those problems on your own. Even worse, if you cause physical harm or property damage to someone else in an accident and are found to be at fault, you will be held liable.

This means that the other driver(s) can sue you in a court of civil law to get their damages paid.

Depending on how severe the accident was, the circumstances surrounding the accident, their injuries, and their property damage, the cost could be astronomical.

If you do not have enough money to cover their expenses and they win their civil case, your assets, such as your home, vehicles, heirlooms, and other items of worth that you own outright can be taken. In addition, your wages could be garnished and liens could be placed on your home.

While paying premiums can seem unnecessary and unfair, the alternative costs are just too much for most people to pay. On the other hand, if you have an active insurance policy, it will pay out for your physical and property damages as well as those of other parties, if you are in an accident.

Insurance for Leased Vehicles and Vehicles with Outstanding Loan Balances

If your vehicle is leased or you still owe on your loan, you are likely required by your contract to have insurance on your vehicle. This protects you and your lease or loan company in the event that your car is damaged in an accident.

In this case, you will not have the option of opting out of additional coverage. You will likely need to pay more than the state minimum in order to satisfy your lender.

Without this type of coverage, you are liable to your lender or leasing company to pay for damages to your car, which can quickly add up, depending on the extent of damages to your car.

Contact your lender or lease company to be sure you have the required and recommended policy types and amounts of auto insurance.

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Keeping Your Auto Policy Current

In some cases, some people flat out refuse to pay or cannot afford to pay their auto insurance premiums. For other drivers, sometimes simple oversight or forgetfulness can cause them to miss a payment on their policy and for them to have a lapse in coverage.

If you find yourself in the latter group of drivers, consider these tips for keeping your auto insurance policy current:

  • Pay your premium on an annual basis  There is more flexibility than ever with most insurance companies as to when and how you pay your premium. You can pay yearly, every six months, or even every month. If you can afford the lump sum, you can also get discounts.
  • Use AutoPay Options  Additionally, most auto insurance companies will give their customers the option of paying their premiums with automatic payment options, such as monthly withdrawals from a checking or savings account, or a debit card or credit card.

Obtaining the proper auto insurance coverage in the appropriate amounts is a step all responsible drivers should take. Auto insurance is a legal requirement and not having such coverage can lead to a lot of headaches and financial burdens in the long run.

If you need to find more affordable car insurance, be sure to look online for price comparison tools. Enter your zip code in our FREE tool below to compare auto rates now!

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Enter your ZIP code below to view companies that have cheap auto insurance rates.

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