Is Car Insurance Required in the United States?

Is Car Insurance Required in the United States?

Car insurance in the US is sometimes expensive, often confusing, and almost always mandatory. Car insurance laws are set and enforced at the state level, and 49 of the 50 US states require all drivers to hold an active car insurance policy. New Hampshire is the only state in which you are not legally required to have car insurance, as long as you can show proof of financial responsibility.

Why has this become the law of the land and what does it mean for you?

Why is auto insurance needed? It is about liability.

The primary reason you need car insurance is because of your liability, i.e., the responsibility for any damages you do. Although you can take optional comprehensive and collision coverage to cover your vehicle, the coverages required by the laws of most states are bodily injury and property damage insurance. These coverages -- through state-specific coverage limits -- provide financial relief for victims of accidental damages. Since there is a potential for physical or material damage to your vehicle, you need to have enough insurance to cover the cost of these damages.

To legally register and drive your vehicle, you need to maintain at least your state's minimum level of liability insurance. If your vehicle is leased or financed, you may need to go above and beyond with comprehensive and collision coverage with low deductibles and gap insurance. This is because a third party – usually your dealership or bank – wants to protect your investment with a higher level of coverage.

The only state that does not require car insurance is New Hampshire. New Hampshire allows you to waive liability insurance if you can prove that you are financially capable of paying for damages caused by an accident. However, you are still responsible for any and all damages - so car insurance is still a good investment.

How Much Car Insurance Is Mandatory?

If your vehicle is legally registered and will be driven on public roads, you will need your state's minimum liability coverage. Since car insurance is regulated at the state level, you will need to check with your state's DMV department to see exactly how much coverage is required.

Some states require more comprehensive insurance coverage than others. No-fault states require a higher level of coverage. These states require every driver to file a bodily injury claim with their insurance company after an accident, which increases insurance costs. No-fault states require you to have personal injury protection (PIP) coverage as well as bodily injury and property damage coverage. PIP covers the cost of medical bills for you and your passengers in the event of an accident. The level of PIP coverage required varies by state.

Why is auto insurance needed? key takeaways.

Since you can cause damage to others while driving, you need liability insurance to ensure that you can pay for damages in the event of an accident. 

How much insurance you need depends on where you live and your vehicle ownership status. If you are leasing or paying for your vehicle, you need a higher level of insurance than for outright ownership of the vehicle. Car insurance doesn't need to be confusing or expensive. If you're looking for a quote, enter your zip code below and get started today. Still looking for more information? Check out our additional resources below!

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Created by MOHAMMAD SHOAIB.