Is Car Insurance Required in Every State?

Car insurance falls in the category of something we seldom realize we need until something happens and we don’t have it. More and more states have made it mandatory that all drivers have auto insurance. Car insurance not only offers protection for damages done to your own vehicle but also protects drivers from lawsuits resulting from car accidents. Despite the importance of car insurance, it’s still not required in all 50 states. Learn more auto insurance and why it’s so important.

Why is Car Insurance Important?

Car insurance is important for several reasons. Vehicles are very expensive investments drivers want to protect from damages. A simple deer hit can cost thousands of dollars of damage. Without car insurance, drivers could be without a vehicle if they don’t have the money to pay for damages. When a bank lends money to a customer to buy a vehicle, the banks wants to be guaranteed they’ll get their money back even if the vehicle is destroyed in an accident.

Last, but definitely not least, is the liability issue. Today, there are more accident-related lawsuits than ever before. Many of these accidents result in six-figure settlements. Car insurance protects drivers from lawsuits that have the potential to financially destroy an individual, couple or company.

What States Don’t Require Insurance

With the exception of New Hampshire and Virginia, all the states require drivers to carry auto insurance. Drivers are not required to carry comprehensive or collision insurance but are required to carry a minimum amount of liability insurance. The amount of liability coverage required by law generally changes from state to state. Since many accidents and accident-related lawsuits are for more than the state-mandated amount of insurance, the Insurance Information Institute recommends carrying at least $100,000 of bodily injury coverage per person and $300,000 per accident.

New Hampshire drivers are not required to have car insurance but are held responsible for damages stemming from a vehicle accident. They’re responsible for up to $25,000 in property damage and $50,000 for liability. If they’re unable to pay these amounts, they could have their registrations and licenses suspended.

Virginia drivers aren’t required to carry auto insurance if they pay the state $500 per year. Some states offer drivers the option of providing proof of financial responsibility as an alternative to auto insurance. This typically involves buying a bond for a certain amount of money to be used in the case of an auto accident.

Understanding Insurance Terms & Coverage

When purchasing car insurance, it’s important to understand the insurance terms and coverage so drivers know what they’re getting and how they’re protected. When purchasing the state-required liability amounts, each number represents a certain coverage type and amount. Each state has their own liability requirements. A driver purchasing liability that’s written as 50/100/25 is getting this coverage:

  • $50,000 is the maximum amount the insurance will pay for bodily injury liability for one person injured in the accident.
  • $100,000 is the maximum amount the insurance will pay for bodily injury liability for everyone injured in the accident.
  • $25,000 is the maximum amount the insurance will pay for property damage liability for one accident.

Are Collision and Comprehensive Required?

Collision and comprehensive insurance are not required by any of the states. Comprehensive insurance is important for drivers who live in rural areas where deer and other wild animals are prevalent. Comprehensive is also beneficial for drivers who live in areas where storms are common. Collision insurance isn’t required legally either but is usually required by lenders if there is a loan on the vehicle.

Related Resource: 10 Best Cheap Car Insurance Companies

It’s important to never underestimate the importance of car insurance. Few things could be as devastating as losing everything due to an accident, and we never know if or when we could be involved in an accident.