Is Car Insurance Required in All States?

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Car insurance is required in most states because it helps compensate victims of accidents caused by drivers. Even in states that don’t require coverage, drivers must prove financial responsibility through a bond, deposit or evidence of self-insurance.

Many policies also include uninsured/underinsured motorist and comprehensive and collision coverages. These are typically optional but may be required by lenders when you finance or lease a vehicle.

Liability Coverage

Liability coverage is a basic form of car insurance that pays for bodily injury or property damage you cause to others in an accident you’re at fault for. The amount you’re required to carry varies by state. New York, for instance, requires minimum limits of $25,000 per person and $50,000 per accident. Often, people choose to buy higher limits than what’s legally required in order to protect themselves financially in the event of an accident they cause.

In addition to liability, the majority of states also require uninsured/underinsured motorist coverage and personal injury protection (PIP) insurance. Several other types of auto insurance offer extra protection, but these aren’t always required by law.

The most important reason why car insurance is required in all states is because it helps victims of accidents caused by drivers who don’t have car insurance or enough coverage to pay for their medical and property costs. Choosing to drive without car insurance is risky, and it puts you at a disadvantage if someone files a lawsuit against you.

Even if you choose not to get auto insurance, financial institutions that lend you money for a vehicle may require you to have it in order to protect their investment. Typically, lenders will require you to purchase collision and comprehensive coverage, which can be added to your liability policy, for extra protection.

Comprehensive Coverage

The opposite of collision coverage, comprehensive insurance pays to fix or replace your vehicle if it's damaged by something other than a traffic accident. This includes events like theft, fires, weather-related incidents (like hail) and damage from animals or other natural causes, such as a tree falling on your car after a lightning strike. The value of comprehensive insurance will vary depending on the make, model and age of your vehicle as well as personal factors like your driving record. Lenders often require comprehensive coverage in conjunction with collision when you're leasing or financing a vehicle.

Almost all states require a minimum level of liability insurance to help pay for the costs of other people's injuries and property damages in case you cause an accident. Some states also require uninsured/underinsured motorist coverage, which helps to cover medical bills and property damages if you're hit by a driver who doesn't have insurance or has a very low policy limit.

The only states that don't require car insurance are New Hampshire and Virginia, but drivers who choose not to carry a policy must show some form of financial responsibility, such as a bond, cash deposit with the state or proof of self-insurance. The rest of the states require a combination of liability, collision and comprehensive insurance as well as other coverages, like PIP or personal injury protection.

Collision Coverage

Collision coverage reimburses you if your vehicle is damaged in a traffic-related accident. This type of coverage is optional, but if you lease or finance your car, your lender may require it. Also, you might want it if your vehicle is expensive or you don’t have the cash on hand to pay for repairs after a serious crash. Collision insurance does not cover mechanical failures or normal wear-and-tear on your car.

Full coverage car insurance typically includes both collision and comprehensive, along with other state-mandated coverage types. This type of coverage offers more financial protection and can help you avoid costly penalties for not having car insurance in New York.

Nearly all states have minimum car insurance requirements to ensure drivers and their passengers are protected in case of an accident. The primary reason for mandatory car insurance is liability coverage, which covers bodily injuries and property damages caused by the driver who is at fault in an accident.

Most car insurance policies also include uninsured motorist and/or underinsured motorist coverage to cover additional expenses. Uninsured motorist coverage (UM) reimburses policyholders for the costs of an accident caused by a driver who does not have car insurance or has insufficient coverage to pay for an accident-related injury. This type of coverage is required in Connecticut, Massachusetts, Maryland, Minnesota, Montana, New Jersey, North Carolina, Oregon, South Dakota, Vermont and Virginia.

Uninsured Motorist Coverage

Some states allow drivers to show proof of financial responsibility by providing a bond, certificate of deposit or cash to the Department of Motor Vehicles in lieu of car insurance. However, this doesn’t replace the coverage and leaves drivers vulnerable if they get into an accident.

In almost all states, a minimum amount of liability coverage is required. But, not everyone has the money to pay for their medical bills and damages in an accident, especially if they’re found to be at fault. That’s why a majority of states require uninsured motorist and underinsured motorist coverage.

Uninsured motorist (UM) or underinsured motorist (UIM) coverage is typically offered as part of a package policy, but it can also be purchased separately. It’s designed to cover injuries and damage caused by a driver who doesn’t have any, or enough, car insurance. Some UM/UIM policies may include both property damage and bodily injury coverage, but the minimum limits vary by state.

Although not all states and insurers offer it, uninsured motorist coverage is a great way to add an extra layer of protection against the costs of an accident. Whether you choose to purchase it or not, though, car insurance is a good investment for any driver. Even in states that don’t legally require it, you’re still responsible for any costs associated with an accident, so it’s best to be prepared.

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