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Why Is Car Insurance Mandatory? (2023) – MarketWatch

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Forty-eight out of 50 states in the U.S. require you to have car insurance, but why is car insurance mandatory? The biggest reason is to make sure that other parties get their medical bills and property damages paid for in case you cause an accident. Car insurance can be expensive, but it’s necessary to ensure that drivers on the road (including you) are protected.
We at the Guides Auto team know that diving headfirst into a car insurance search can be stressful. We have reviewed and ranked the best car insurance companies to help you make the best decision for your auto insurance needs.
Driving comes with many risks — to you, your passengers, your vehicle and to all other people on the road. Anyone is capable of getting into a car accident, which is why drivers are responsible for carrying insurance if they cause an accident. That way, they can pay for the injuries or property damages to others and themselves if they’re liable.
Drivers should at least get a liability insurance policy to help protect themselves from costly bills. Minimum-liability insurance is required in almost every state, but for further protection, comprehensive coverage, collision coverage and personal injury protection are coverage add-ons to consider.
Car insurance is mandatory in 48 out of 50 states. In New Hampshire, you’re not required to have car insurance as long as you can prove your financial responsibility to cover the injuries and property damages of other parties in a car accident that you’re at fault for. For New Hampshire drivers who choose to get car insurance, the state does have minimum limits.
Virginia also doesn’t require auto insurance, but like New Hampshire, it has a minimum amount of liability coverage for those who want insurance. If you’re a Virginia resident, you can pay a $500 uninsured motorist fee to opt out of these requirements and become an uninsured driver.
Every state has different minimum automobile insurance requirements, and depending on your insurance profile, the type and amount may change. If you don’t live in New Hampshire or Virginia, it’s illegal to drive without the minimum required insurance. The most common car insurance requirement is liability car insurance.
The six standard types of car insurance coverage that typically make up a full-coverage policy
Liability car insurance covers the medical expenses and property damages of other drivers from an accident where you’re found at fault. Since your vehicle has the ability to cause physical and material damage to others, you need enough insurance to cover the costs of those damages. All drivers must have the minimum limit of liability coverage set by their state.
The two types of coverage that make up liability insurance are bodily injury liability coverage and property damage liability coverage. It’s important to understand that liability insurance won’t cover your own bodily injuries and car damages in the event of an accident.
While minimum-liability car insurance is the coverage required by law in most states, there are other types of car insurance coverage required in certain states and recommended in others. These include:
Comprehensive and collision insurance aren’t mandated by state law, but most auto loan lenders require them. Uninsured/underinsured motorist coverage is mandatory in 20 states and Washington, D.C. MedPay is required in the state of Maine. It’s also required in New Hampshire if the driver chooses to get car insurance. PIP is required in the 12 “no-fault” states.
A no-fault state is a state where all driving parties use their own insurance to cover their own injuries and car damages, regardless of who caused the accident.
Let’s say you live in a no-fault state and somebody else causes an accident with you. Your own coverage takes care of your injuries and property damages up to the amounts specified in your auto insurance policy.
While most states require car insurance, the amounts you need will vary by state. With liability coverage, the numbers are often written like this: 25/50/15. Here’s an example of how it breaks down.
Below you can find a breakdown of the minimum-liability insurance requirements in each state.
*Drivers can opt out of insurance in certain circumstances.
The penalties you face for driving without car insurance can vary by state, but the penalties often get worse the more you get caught driving uninsured. The most common penalties are paying heavy fines and losing your driver’s license, but in many states, you could also face jail time after several offenses.
Fines can reach up to $1,000 for many states and higher in others. In Michigan, you can get up to one year in jail for driving insured just one time. That’s why it’s important to maintain car insurance and be aware of upcoming coverage gaps.
The average national cost of minimum-liability car insurance is $635 per year. The average cost of car insurance for a full-coverage policy is $1,730 per year. However, auto insurance rates will be different for each policyholder based on a number of factors that include their company, driving profile and age.
Here are the top ten car insurance companies and their national averages for minimum-liability coverage. These averages are based on the profile of a 35-year-old married driver with good credit and a safe driving record.
The table below shows average national rates for full-coverage car insurance per provider. These averages are for policies with liability coverage, collision insurance and comprehensive coverage.
*Rates are based on the profile of a 35-year-old married driver with good credit and a clean driving history.
In addition to the state you live in, car insurance costs depend on the company you choose, the vehicle you drive and whether you live in a city versus a rural area.
Icons showing the factors that influence the cost of car insurance These are the most important factors insurance companies take in when calculating car insurance premiums:
Car insurance is mandatory to legally drive your motor vehicle on public roads and to protect yourself and others from damages that occur in the event of an accident. Everyone is required to have the minimum amount of car insurance as dictated by state law, but it’s good to reach out to your insurance agent to see if you need additional coverage.
There are many car insurance providers to choose from and we have researched and reviewed the top companies to help you make an informed decision. State Farm and Progressive are two great companies to compare car insurance quotes from.
State Farm is our team’s top choice for car insurance because of its generous discounts and affordable rates — especially for younger drivers. State Farm also has a large network of local agents, which makes it easy to get help on a claim or an insurance question.
State Farm’s Steer Clear® program is a great way for drivers to save money on their car insurance premiums by practicing safe driving habits.
Read more: State Farm insurance review
Progressive has lower rates for most drivers than the national average, making it one of the more affordable options for car insurance on the market. Progressive’s Name Your Price Tool® allows drivers to select their budget and have Progressive choose a plan that fits their needs. Progressive is known for its relatively affordable rates for high-risk drivers.
Read more: Progressive insurance review
Below are frequently asked questions about why car insurance is mandatory:
In most states, you must get at least the minimum required amount of car insurance to drive your vehicle on public roads. Auto insurance laws are in place to protect drivers when there’s an accident. If you are at fault, your liability coverage helps pay for the damages.
Car insurance is important because if a driver causes an accident, they may be liable to pay for the injuries and property damages to the involved parties, depending on the state. Since most people can’t afford to pay for those medical bills and property repairs out of pocket, car insurance exists. Car insurance makes sure that injured drivers get their medical expenses and car repairs paid for.
If you choose to drive without insurance on public roads in a state that requires insurance, the punishment will depend on the state law. You could be subject to a hefty fine, a driver’s license suspension or even jail time in certain states.
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.
In this article, we selected companies with high overall ratings and cost ratings. The cost ratings were informed by auto insurance rate estimates generated by Quadrant Information Services and discount opportunities.
*Data accurate at time of publication.
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