In some cases, car insurance can be expensive. It is also confusing, but it is mandatory in many places in the United States. The laws for insurance are enforced at the state level, and nearly every state requires drivers to have active insurance policies in their cars. You may be wondering why it is so vital for you to have insurance.
One of the main reasons why you need to have car insurance is because of liability, or responsibility for damages that you might cause with your car. You might have collision coverage or comprehensive coverage. Many states also require property damage and bodily injury insurance.
With this type of coverage, any victims of damage caused in an accident can have financial relief. Because your vehicle might cause material or physical harm, you should have enough insurance to cover each of these potential damages.
To drive and register your vehicle liability, you have to have the minimum level of liability insurance in your state. If your car is financed or leased, then you might need to do more than this. You might have to have collision and comprehensive coverage that has low deductibles.
The reason for this is that a third party, such as a bank or dealership, wants you to protect this investment with more coverage.
In New Hampshire, you do not have to have car insurance. This state lets you avoid having liability insurance if you can show that you have the assets to pay for damages you could cause if there is an accident. However, that means that you are responsible for covering any damages, which means that it is a good idea to get car insurance.
Protecting Your Assets
If your car is financed, the lender might require that you have both collision and comprehensive insurance for your loan agreement. But you also want to protect your assets and yourself with car insurance.
It is often recommended to have around $100,000 as a minimum for bodily injury protection for each person. And you might want to get at least $300,000 for accident insurance. Having an accident might cost more than the minimum that a state might have.
If you cause an accident, you might be responsible for any costs that are associated with it. That might include medical expenses for that person or for their lost income. It can also include legal fees. If you have liability coverage, you might be better able to pay for the costs.
If you don’t have enough liability coverage or high enough limits, you would most likely find yourself paying for these costs from your own money.
Required Insurance for Leasing
If you do not own the vehicle outright, the lender might require that you get collision or comprehensive coverage. The lender is the one that holds the lien on the vehicle when you are making payments. This means that these kinds of coverage can protect the vehicle. The coverage may help them to either repair or replace your vehicle if it is damaged and the loss is covered.
If your auto policy comes with gap insurance, then that coverage can help you to pay off the car loan if you total the vehicle or if it is stolen. This is important if you owe more on the vehicle than its depreciated value. It is optimal to get gap insurance, and it works with both comprehensive and collision coverage.
Protecting You From Repair Costs
Even if you outright own your vehicle, you might need to have collision coverage on the car. Having mandatory liability coverage will help you pay for damage to someone else’s vehicle, but you should also have your own vehicle covered.
For instance, if your car is damaged in a storm, then having comprehensive coverage allows you to pay for replacement or repairs if your car gets stolen or is damaged by something.
Or you might hit someone’s mailbox and damage the bumper on the front of the car. Having collision coverage allows you to pay to repair the vehicle if you hit anything, no matter who is at fault.
If you didn’t have this coverage, you might have to dip into your own savings to fix the vehicle.
Protecting Your Passengers
You might want to look into personal injury coverage and medical payments protection to help pay for any medical bills that might result from you being in an accident. These can also pay for the expenses of your passengers because of the accident. That can help to pay for surgery, hospital visits, or doctor bills.
Even though you are legally required to have liability coverage, it is easy to drive without having it. If you have uninsured motorist coverage, you can be better prepared to pay for the medical bills if you get hit by someone that does not have insurance. That might be required in some states, and in others, it might not be.
How Much Car Insurance Do You Need?
If your vehicle is registered legally and will be used on public roads, you should have the minimum liability coverage for your state. Insurance is registered by states, not the federal government, meaning you will need to look at the DMV website for your state to see the amount that you need.
In some states, you might need to have more comprehensive insurance than in others. If you live in a no-fault state, you may need to have more coverage. In these states, each driver will need to file claims with companies after an accident has occurred.
You will also need to have personal injury protection coverage in no-fault states, as well as ones that will cover property damage or bodily injury.
Closing Thoughts on Car Insurance
You might harm others when you are driving, so you have to have liability insurance that will ensure you are able to repay any damages if an accident happens. The amount of insurance that you need depends on the area in which you live. It also depends on your vehicle’s ownership status.
If you are making payments on or leasing your vehicle, then you might need to have higher amounts of insurance than if you own your car. Talking to an insurance agent can help you decide how much coverage you need.