Do I Have to Have Car Insurance?

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Whether or not you are required to have car insurance depends on two factors: (1) the state you live in; and (2) if you have taken a car loan.

All 50 states have financial responsibility laws that require drivers to be able to pay for any liability they cause in an accident.  However, only 49 states, and the District of Columbia, require residents to purchase some form of liability insurance.

The only state, as of November 2010, that does not require residents to purchase any form of auto insurance is New Hampshire.  But, even New Hampshire has financial responsibility laws that give residents the option of either having insurance or having enough money to pay for damages to others that may be caused by a motor vehicle.  And most drivers in New Hampshire choose to satisfy their financial responsibility requirements by purchasing auto insurance.

As to the states that require liability insurance, each state has different requirements when it comes to car insurance and the mandatory insurance minimums.  Most states require drivers to have Bodily Injury Liability insurance.  In some states, drivers are not even allowed to register their cars without showing proof that they have liability insurance.  Other states only require proof if a driver gets in an accident or gets a ticket.

In addition to legal requirements, many lenders require those taking car loans to purchase Collision and Comprehensive coverage on vehicles they finance.  Some even require those they finance to purchase “Gap” insurance, which pays the difference, in the event your car is stolen or you total your car, between what you owe on a car and what the insurance company determines the car is worth.  This insurance protects the lenders interests in the event you damage a car that has not been paid for.

Moreover, purchasing car insurance is smart planning that can protect you in multiple ways.  Auto insurance can:

  • Protect investment you have made in your car;
  • Pay for your medical bills if you are in an accident;
  • Protect you from the costs and monetary consequences of a lawsuit resulting from an accident;
  • Shield your other hard-earned assets, such as you home, retirement finds, stock investments, etc.;
  • Protect you against damage caused by uninsured or under-insured drivers;
    • Cover repairs needed as a result of theft, vandalism or natural disasters; and
    • Help provide you with peace of mind regarding your automobile.

However, with people being injured in car crashes every 14 seconds, and over $100 billion being spend annually as a result of automobile accidents, car theft and vandalism, it is wise to purchase some form of auto insurance.

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