Why Is Car Insurance Mandatory? (2024) (2024)

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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.

Source: Allstate

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.

What Is Minimum Liability Car Insurance?

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.

Types of Car Insurance That Are Sometimes Mandatory

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:

• Collision insurance: Collision coverage takes care of repair costs for your vehicle after a car accident, regardless of who’s at fault.
• Comprehensive insurance: Comprehensive coverage pays for vehicle damages that aren’t related to car accidents, such as from animals, falling objects, fire, floods or other natural disasters. This also pays to replace a stolen or vandalized vehicle.
• Medical payments coverage (MedPay): MedPay will cover the medical expenses of you and your passengers after a crash, but it won’t cover lost wages.
• Personal injury protection (PIP): PIP pays for medical expenses for yourself and your passengers, but will also cover lost wages and funeral costs.
• Underinsured/uninsured motorist coverage (UIM/UM): UIM/UM will pay for your property damages and medical bills if you’re the victim of a hit-and-run. It will also cover you if you get into an accident with a driver who has little or no car insurance.

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.

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.

Car Insurance Requirements by State

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.

• First number: $25,000 limit of bodily injury liability per person
• Second number: $50,000 limit of bodily injury liability per accident
• Third number: $15,000 limit of property damage per accident

Below you can find a breakdown of the minimum-liability insurance requirements in each state.

*Drivers can opt out of insurance in certain circ*mstances.

Driving Without Mandatory Car Insurance: Penalties

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 $627 per year. The average cost of car insurance for a full-coverage policy is $2,008 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.

Average Cost of Car Insurance: Minimum-Liability Coverage

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.

Average Cost of Car Insurance: Full Coverage

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.

Factors That Affect Car Insurance Rates

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.
These are the most important factors insurance companies take in when calculating car insurance premiums:

• Age
• Marital status
• Driving record
• Gender listed on license
• Credit score
• Location

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.

Top Auto Insurance Recommendations

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: Best Customer Experience

State Farm is one of our team’s top choice for car insurance because of its generous discounts, affordable rates, and excellent customer service. 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

Erie: Best for Basic Insurance Coverage

Erie offers low premium costs on basic insurance coverage and can also be affordable for high-risk drivers, which includes those with a recent DUI, speeding ticket or accident on their record. However, Erie only operates in Washington, D.C., and 12 states across the eastern and central U.S. If you are from there, we recommend getting a quote from Erie.

Keep reading:Erie insurance review

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.

Here are the factors our ratings take into account:

• Cost: Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
• Coverage: Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
• Reputation and experience: Our research team considered market share, ratings from industry experts and years in business when giving this score.
• Availability: Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
• Customer experience: This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.

Our credentials:

• 800 hours researched
• 45 companies reviewed
• 8,500+ consumers surveyed

*Data accurate at time of publication.