Good auto insurance coverage is important because it provides financial protection against a covered loss. If you are at fault in an accident, the liability coverage would cover property damage and help pay for the injured party’s medical bills. It also covers your legal fees, should the third party take you to court over the incident. Auto insurance is required in most states and is monitored at the state level.
Why do most states mandate auto insurance, and what does this mean for you?
Why Is Car Insurance Mandatory in My State?
All fifty states, except New Hampshire and Virginia, require auto insurance. To register your vehicle with the state, you must maintain auto liability coverage. Each state sets its own minimum bodily injury and property damage liability limit requirements.
According to the Environmental Protection Agency, the average car weighs 4,156 pounds. Imagine how much damage 4,156 pounds could cause, even moving at a slow speed. Most states’ minimum obligations are not enough to cover damages in a major accident.
Once a claim reaches policy limits, you’re responsible for the additional damages. Carrying limits higher than what’s required can help protect you against potential lawsuits.
Auto Insurance Provides Financial Protection
Auto insurance is there to protect both you and others on the road. While not state-mandated, most car owners elect to buy coverage for their own vehicles as well.
Depending upon the coverages you purchase, your policy could protect you against:
- Hailstorm damage
- Damage caused by animals
- Damage caused by an uninsured driver
For example, let’s say someone steals your car. The police recovered it, but it’s no longer drivable. Comprehensive coverage would pay to repair or replace your car.
Without comprehensive, you’re responsible for all repairs. Even if you carry the title on your car, it’s a good idea to carry comprehensive and collision coverage, too. Otherwise, you could find yourself applying for car repair loans to cover the damages.
Car Insurance Provides Medical Coverage
While liability coverage is state-mandated, there are many uninsured drivers on the road. Let’s say you’re injured in an automobile accident and the driver isn’t insured. Uninsured motorist coverage could help cover your medical bills from the accident. This important coverage is a requirement in some states and optional in others.
There are other medical coverages you can purchase to cover both you and your passenger. Personal injury protection and medical payments can help pay for:
- Hospital bills
- Doctor visits
- Loss of wages
Personal injury protection, also known as PIP, is a requirement in some states.
Your Auto Loan or Lease May Require Car Insurance
Have you leased or borrowed money for your vehicle? If so, carrying collision and comprehensive coverages may be a condition of your loan. This helps protect the lender’s investment until you’ve paid off the loan.
Some lenders also require gap insurance. Let’s go back to the incident where a thief stole and totaled your car. The insurance company pays the value of the car. In this case, the carrier values the vehicle at $16,400. The balance on your loan is $21,000. Without gap insurance, you’re responsible for the $4,600 balance. While these policies are optional in most cases, it’s recommended if you carry a balance on your loan.
Proper car insurance coverage benefits everyone. You protect your vehicles and your pocketbook. If you’re still not sure, compare car insurance online. These costs are far less than fixing or replacing a vehicle out of pocket.
Still, some people believe the advantages don’t match the cost. Don’t approach your insurance payment as a lump sum. If added to your budgeting tool, the cost is minimized. The end result? Peace of mind on the roads.
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