Do You Really Need Car Insurance? Here’s Our Guide To Help You Figure it Out
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Let’s say you’re involved – unfortunately – in an auto accident, and your vehicle suffers substantial damage that will cost several thousands of dollars to fix.
Or you, like hundreds of thousands of Americans every year, fall victim to auto theft.
In either scenario, the benefit of paying car insurance premiums comes into play, as your provider ensures your vehicle receives necessary repairs or is replaced altogether, covering the expenses once you pay a deductible.
But is auto insurance required? Depending on where you live, it might not be. Is it worth it to save some money yet be unprotected if you get in an accident?
Let’s look at car insurance in more detail and whether or not you have to have it.
What is car insurance?
Car insurance provides a financial safety net in the event of a collision or other vehicle-related expense. Car insurance also covers related medical costs and property damage resulting from an accident. If you cause an accident, car insurance also pays the costs for others involved.
Auto insurance policies aren’t one size fits all, containing specific categories and associated financial limits and vary from company to company. Particular providers also offer unique perks, like accident forgiveness or a safe driving discount.
Three main categories of car insurance exist: liability, comprehensive, and collision.
If you cause an accident, liability insurance pays costs related to vehicle damage, property damage, and medical expenses of the other party. If the other driver decides to sue, liability insurance also pays for legal fees.
Liability insurance offers financial coverage for three unique areas: bodily injury per person, bodily injury per accident, and property damage. Depending on the plan you select, different monetary amounts apply to each category.
As an illustration, a 100/300/50 car insurance liability plan covers $100,000 for bodily injury per person, $300,000 bodily injury per accident, and $50,000 in property damage. You can select less coverage and subsequently pay a lower premium.
Comprehensive auto insurance pays for damages occurring outside of a collision, like weather events, theft, or vandalism. Typically, the financial limit of comprehensive coverage equals your vehicle's total value. Before comprehensive insurance pays for vehicle damage, you first have to pay a deductible. Deductibles vary depending on the plan you select, but generally speaking, the higher the deductible, the lower the premium, and vice versa.
Collision insurance pays for damage to your vehicle when you're at fault in an accident. It doesn't cover costs related to another driver's car or pay medical expenses. Like comprehensive insurance, an initial deductible applies before coverage goes into effect, usually costing $500 or $1,000. Although it's possible to have a zero-dollar deductible, you'll be responsible for higher premiums.
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Do you have to have car insurance?
Unless you live in Virginia or New Hampshire, state law requires you to have car insurance.
But drivers without car insurance don't escape responsibility when they cause an accident.
Though New Hampshire doesn't mandate its residents to have car insurance, they're still liable for the damage they cause in a collision, owing up to $50,000 for liability and $25,000 for property damage. If a New Hampshire driver is at fault in an accident and refuses to pay those expenses, the state suspends their license and registration.
Virginia takes a similar stance, with at-fault drivers held financially accountable when they cause an accident. Though Virginia drivers have the option of paying a $500 uninsured motorist fee to the state in place of obtaining auto insurance, they're still without any coverage should they be in a collision.
As a substitute for car insurance, some states offer drivers the option of showing proof of financial responsibility by purchasing a bond for a set sum of money. The bond pays out if the driver causes a collision at some point. Though the bond pays for accident-related costs up to a limit, the driver still has to pack back the entire sum plus interest.
Of the 48 states that require car insurance, each has its own set of requirements for coverage and the associated financial limits.
California's minimum car insurance requirement is $15,000 in bodily injury liability per person, $30,000 in bodily injury liability per accident, and $5,000 in property damage liability per accident.
Oregon goes even further with its minimum car insurance rules by mandating $25,000 bodily injury liability per person, $50,000 bodily injury liability per accident, $20,000 property damage liability per accident, $25,000 uninsured motorist coverage per person, $50,000 uninsured motorist coverage per accident, and $15,000 personal injury protection.
Other states' regulations cover a broad spectrum, and researching your locale will prepare you to purchase the policy you need.
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Why having car insurance is a good idea
Whichever state you live in, purchasing a car insurance policy comes with benefits that make the cost acceptable.
If you’re in an accident, expenses can run high, from vehicle repairs to medical expenses, to property damage. Without a car insurance policy protecting you from those sizable financial obligations, you’re susceptible to serious money issues in the event of a collision.
For optimum driving safety, your vehicle needs proper maintenance if mechanical issues arise. Whether you encounter bad weather or need to tow a boat with your SUV, your car must be in top working condition. But if you buy a used car with an expired factory warranty, how can you be insured against unexpected problems? Shift vehicle protection plans give you essential coverage, protecting your vehicle from the sheet metal to the tires, and offer additional perks like flat tire fixes and rental car reimbursement.
Car insurance requirements in summary
Though not necessary in every state, car insurance offers vital financial protection if you're involved in an accident. Even in states like Virginia or New Hampshire, which don't require an auto insurance policy, it pays to have one for security and peace of mind.
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April 15, 2022
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