While auto insurance probably isn’t something you think an excessive amount of about, the reality is that car insurance is a required purchase, not an optional one — so you will need to be sure you find the correct coverage.
So, why can you must have car insurance if you’re going to have a car (or drive one)? Listed below are three big reasoned explanations why getting covered is essential.
1. Nearly all states require auto insurance
Auto insurance is normally required by law before someone can buy or register a vehicle. While you will find variations in the types and levels of coverage states require, just about any state mandates that drivers have certain forms of auto insurance policies.
Specifically, most states require motorists to get bodily injury liability and property damage liability coverage. Both protect other people on the roads. In case a driver causes an accident, they may be held in charge of physical injuries other people suffer — and for resulting damages from those injuries, such as medical bills and lost wages. A motorist could also be held in charge of property damage. Liability policies ensure a driver has the amount of money to cover these costs.
Some states also require other forms of coverage. A driver might need personal injury protection, which provides payments for the driver’s own medical costs and loss of wages in minor accidents regardless of who is to blame. And a motorist might need uninsured or underinsured coverage too, which pays for their own personal losses when someone else causes an accident but doesn’t have sufficient insurance to cover damages to another driver.
A driver who doesn’t have the insurance their state requires might be ticketed or cited for evidence of insurance. This really is considered a misdemeanor offense in some cases. No-one wants to face fines, criminal penalties, or higher priced insurance later on simply because they didn’t conform to minimum coverage requirements.
2. A lender may require drivers to possess coverage
When someone gets a car loan, odds are good their lender will need them to possess insurance. Actually, they’ll probably need more insurance than their state mandates.
Many car loan lenders require people to get collision coverage, which pays for repairs to the car if that policyholder causes a crash. Comprehensive coverage is normally also mandated to cover any repairs or the replacement of an automobile if it’s stolen or damaged by something besides a collision (such as a tree falling on it).
And gap insurance could also be required. It pays the difference between what someone owes on their car loan and the amount their insurer would reimburse them if their car was totally destroyed. That’s important as the fair market value an insurer will pay is frequently below what a motorist owes.
Lenders may be authorized by the car loan agreement to buy very costly insurance and charge the driver for it if they let their policy lapse. And in some cases they may even repossess someone’s car if they’re required to possess coverage and fail to comply.
3. An insurance coverage can protect a driver’s assets
Even though no state or lender requirements applied, buying car insurance would still be essential.
That’s because without it, a driver might be financially in charge of anything that goes wrong. This might mean paying all legal fees and damages in case a motorist causes an accident and hurts someone. Or it might mean covering all the costs of repairing or replacing their own car if something happens to it.
Car insurance is this kind of important form of asset protection that you may want to consider buying a lot more than your state or lender requires. That’s because minimum coverage limits are typically pretty low. It could be simple to cause more harm to someone in an accident than an insurer would purchase in case a driver had only minimum coverage.
Remember, in the event that you don’t wish to bear the entire risk of a potential problem occurring, be sure you have insurance to share that risk. Paying premiums might be really worth it to have an insurer to commit to covering major losses if and when they happen.