Is auto insurance really necessary? Why do I need it?

Since car insurance is so expensive, partiularly for teenagers and other young drivers, it’s natural that this question should come up frequently for first time car buyers.

You need insurance on your car to protect you from the risk of disasterous financial problems resulting from accidents,  personal injury and property damage, and loss by theft, fire, or natural disasters. It may seem pointless to spend so much money on something you may never need. But if you ever need it, you’ll be really happy you have it.

It’s tempting to believe that you don’t need insurance because you are a safe driver and will never cause an accident. However, other people can involve you in an accident that is not your fault. If the other driver doesn’t have sufficient car insurance, your own insurance will take over and pay your repair bills and medical expenses.

You might avoid insurance if you had enough money to cover such problems on your own.  This is called “self-insurance.” However, self-insurance is not legally sufficient in most states and is not practical for most people.

Financial responsibility laws in all states (except Wisconsin and New Hampshire) require automobile insurance coverage. The laws specify the type of insurance that is required and the minimum level of coverage. In most cases, liability insurance – bodily injury and property damage – is required, to help protect drivers from the financial risks of injury and damage caused to others in accidents. Other coverage may be required as well. The Insurance Information Institute publishes a table showing auto insurance requirements for all states.

If you purchase only the minimum insurance required in your state, you may be seriously under-insured. Many of these laws were put in place years ago and the mandated coverage amounts don’t reflect today’s higher accident costs. For example, some states require only “10/20/10″ liability coverage. This means the insurance only pays up to $10,000 for bodily injury to a single person in an accident, $20,000 for all persons, and up to $10,000 for property damages.

Medical costs for someone seriously injured in a car accident can easily exceed $10,000. Damages to  an expensive luxury car can easily exceed $10,000. You can be held personally responsible for any costs above that which is covered by your insurance. Therefore, you should consider increasing your liability limits to a minimum of $100,000 for a single person and $300,000 for multiple persons.

The above mentioned state laws say nothing about collision and comprehensive insurance that covers your own vehicle. Young drivers often try to lower insurance cost by getting only the minimum liability policy required by state law. This can be a serious mistake. If you can’t afford to repair or replace your vehicle in case of an accident, you need additional insurance. Furthermore, if you have a loan or lease, your finance company or bank probably requires that you have collision and comprehensive (“full coverage”) insurance.

What if I drive without auto insurance?

If you drive without insurance, you are violating the law. You can be fined, arrested, jailed, your vehicle impounded, or your license revoked/suspended, depending on the laws in your state.

If you have an accident and damage or destroy your own vehicle, the cost of repair or replacement is completely on you. If you cause an accident and injure other people or damage their property, you are subject to being sued. Don’t drive without car insurance.

You can get free auto insurance quotes from Esurance.comwho will show you an instant rate quote. You are not obligated to accept any offer.


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