Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Mar 25, 2022

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Just the Basics

  • Liability insurance is required in every state except Virginia and New Hampshire
  • The cost of repairs and medical care can far outweigh the cost of insurance rates and deductibles
  • In states that require car insurance, the penalties for going without are not worth the risk

A car insurance policy is a legal contract between a driver and an insurance company. The driver pays the insurance company a premium, and, in exchange, the insurer agrees to pay for any damages the driver causes. The insurance company bases its rates on how risky it perceives the driver to be, based on age, experience, driving history, and other factors.

Car insurance rates can add up quickly. A voice in the back of your mind may be asking: “Why do you need car insurance? Wouldn’t it be cheaper to skip it?” In addition to being required in 48 states, having the right coverage can help protect you and others from expensive bills if you’re in an accident.

This article will explain why you need insurance and explore the hidden costs of going without it. We’ll walk you through different types of car insurance policies so that you feel better equipped to make a decision about what coverage you need.

How does car insurance protect you?

If you cause an accident, you are liable for paying for damages for the other vehicle, personal property, and medical bills of everyone affected. You also have to pay for repairs to your car and your own medical bills. When you have the right auto insurance policy, you pay rates and deductibles, but these usually add up to much less than paying for all the damages out of your pocket. You have several options when choosing a car insurance package.


States that require drivers to carry car insurance (all states except Virginia and New Hampshire) require liability coverage at a minimum. This type of policy pays for damage and injuries that you’re liable for. This protects other people when you are at fault, but it also saves you from paying all expenses out of pocket. Each state that requires liability coverage has a minimum requirement, so it’s important to know whether you have enough accident coverage. For more protection, you can increase the amount of coverage on your policy.


Comprehensive coverage is an optional add-on covering damage unrelated to a collision. For example, this is the policy that covers hail damage and theft. If you are paying a car loan, your lender will likely require comprehensive coverage.

Personal Injury Protection

Personal injury protection coverage (often referred to as PIP or no-fault coverage) may pay for things like medical or funeral expenses for yourself and your passengers, as well as lost wages due to an injury. Some states require PIP, and some don’t, but it’s worth looking into even if it’s not needed.


The requirement for collision insurance, like comprehensive, depends on your state but may be needed by a lender. It’s also likely that you’ll need to carry collision coverage if you lease a vehicle. It kicks in to pay for repairs to your car when you get into an accident, no matter who is at fault. It also covers you if you run into a tree or another stationary object.

Full Coverage

You may hear people talking about full coverage auto insurance when they mean comprehensive. Full coverage refers to comprehensive, collision, and liability combined.


If you total a car that you still owe money on, the insurance payment you get (based on the vehicle’s cash value) may not be enough to pay off the loan. In this case, GAP coverage will help cover that difference.


You may be wondering if insurance is necessary for car drivers who don’t own a car. Non-owner insurance goes with the driver, not the vehicle. If you’re renting a car and don’t already have insurance, you can buy short-term coverage from the rental company. However, if you rent cars more than once a year, it may be worth getting year-round non-owner coverage. If you borrow friends’ cars with their permission, you’re covered under their policies, but non-owner insurance can pick up where their policy limits end if you get into an accident.

Medical Payments

Medical payments coverage is required in a few states and optional in most. It can help cover medical expenses after an accident, similar to personal injury protection.

Underinsured and Uninsured Motorist

Around half the states in the U.S. require uninsured motorist coverage. This policy covers both your car repairs and your medical bills if another driver caused an accident but had no insurance or not enough to pay for the actual costs of your medical care and car repairs.

The types of coverage that are right for you depend on what car you drive, whether you own or lease it, and more. For example, if you drive an older vehicle that wouldn’t be worth repairing, you may not want to pay for comprehensive coverage. On the other hand, if you still owe money on your car and it’s a popular model among car thieves, you might want to opt into comprehensive.

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What is the cost of not having insurance?

Even if liability insurance is not required where you live, skipping it does not guarantee that you will save money. If you cause an accident while driving without insurance, you will be responsible for potentially thousands or tens of thousands of dollars in medical and vehicle repair bills for the people in your car and the people in the other vehicle. If you cause property damage, you will also be liable for the cost of repairs to that property. There is a high likelihood that these bills will far outweigh the cost of auto insurance rates and deductibles.

What are some other risks of not having car insurance?

In states that require car insurance coverage, you have to think about the penalties for not carrying it, in addition to the costs described above.


A typical penalty in most states is a fine of around $500, a revoked driver’s license, and canceled vehicle registration.

Some states also impose jail time, especially for repeat offenders. You could also have your vehicle impounded. Even if you don’t end up in jail, you will pay high fees to get your license and registration reinstated and your car out of impound.

Why do you need car insurance?

Why is car insurance mandatory? If you drive a car, having vehicle insurance protects you from paying for damages from your own money. Depending on the type of coverage you choose, it can also help you get your car repaired so you can get back to driving as soon as possible after an accident, theft, or hail damage. When it comes to auto accident preparedness, it’s best to make sure you are covered, no matter what happens.