If you own a car, then you need to have car insurance. Having auto insurance is mandatory in the United States, and you can get in legal trouble if you don’t have it. But why is that the case?
Nearly Every State Requires It
The federal government lets states set laws regarding car insurance. Of the 50 states, only New Hampshire does not have mandatory car insurance. In New Hampshire, you can either have car insurance or must be able to show that you are financially responsible, meaning you could pay for an accident.
The Coverage Requirements Vary by State
Keep in mind that while 49 out of 50 states require car insurance, they don’t all have the same requirements. Most require insurance that covers property damage and bodily injury, but there are variations.
If you live in a no-fault state, you will need even more coverage. These states require Personal Injury Protection coverage, PIP. This coverage will pay for medical bills for your passengers as well as you.
Liability Is the Reason for Mandatory Car Insurance
The reason for mandatory car insurance mostly comes down to liability. It helps ensure that you can be financially responsible for any potential damage you cause while driving. Essentially, the insurance ensures that if you hit someone and cause damage to their car or injuries to them, you can pay for the repairs or treatment.
The bottom line is that mandatory car insurance is there to protect everyone around you when you drive your car.
Leasing and Renting Can Increase Insurance Requirements
Although not always the case, your state may require more than the minimum insurance coverage if you lease your car or are renting it. You may need gap insurance or to meet other requirements. This comes from the fact that in addition to the state’s mandatory car insurance, the owner of the car wants extra coverage to protect themselves financially.