Who Needs Auto Insurance, Anyway?

Nearly every state in the country requires an auto insurance policy for each vehicle that a resident owns. Anyone who owns, leases or finances a car needs to have the state mandated minimum auto insurance to drive that vehicle legally.

Anyone who owns, leases or finances a car needs to have the state mandated minimum auto insurance to drive that vehicle legally.

Consider the costs involved when two or more cars collide with one another. Consider the medical bills and lost wages if there is bodily injury. There may also be final expenses if someone is killed. Car insurance is meant to mitigate these risks for drivers who pay their monthly premiums.

Consider the costs involved when two or more cars collide with one another.

Instead of asking who needs auto insurance, ask yourself who doesn't need it? Even in a state like New Hampshire, where insurance coverage is optional, most drivers buy car insurance to avoid the heavy costs that go hand-in-hand with car accidents.

What If I'm Caught Driving Without Car Insurance?

If you're caught driving without the state's minimum insurance coverage requirement, not only are you breaking the law, you will be held personally responsible for costs of property damage, injuries, even death. You may also have to pay legal fees to fight charges against you in court. If you lose your wages may be garnished.

If you're caught with a DUI and have no auto insurance, you may get jail time on top of overwhelming penalties and a suspended license. Reinstating your license will require that you file an SR 22 form, and your auto insurance rates will go up. High risk drivers pay the highest insurance rates.

If you had car insurance and were sued by the other party, however, your legal bills would be covered by your car insurance policy.

Is Liability Only Insurance Enough for a Personal Auto Policy?

According to the Insurance Information Institute (III), "Chances are that you will need more liability insurance than the state requires because accidents cost more than the minimum limits." New cars, especially, are very expensive to repair or replace. A minimum limit liability insurance policy may not cover all costs.

Chances are that you will need more liability insurance than the state requires because accidents cost more than the minimum limits.

Consider raising your liability limits. If you have assets to protect, consider buying an umbrella policy.

Again, liability insurance will not cover your own car if you're at fault. It'll only cover someone else's car. To cover yourself, you'll need comprehensive insurance for glass coverage, theft vandalism and all other non-collision related losses. You'll need collision cover for property damage (your car repairs or replacement).

What Is Bodily Injury Liability?

Bodily injury liability is the portion of your liability coverage that takes care of medical bills for the other driver and their passenger(s).

If you want protection for medical bills for yourself and your passengers, consider personal injury protection (PIP) coverage.

What Is Property Damage Liability?

Property damage liability is the portion of your liability coverage that takes care of property damage to the other car or any other property that you may have damaged in a car accident.

Consider buying collision coverage if you want to protect your own car.

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Who Needs Gap Coverage?

People with new cars buy gap coverage because when the car depreciates, they will owe more than the car's market cash value. Gap insurance would cover the remaining balance were you to have a total loss with the car.

Review your car loan against the market value for your car to decide if you need gap insurance.

How Much Auto Insurance Do I Need For a Loan or Lease?

You may have no choice but to buy collision coverage and comprehensive insurance if you take out a loan to buy your car or if you lease it through the manufacturer. You need these products because the car technically still belongs to the lienholder or lender.

Your loan or lease will require that you have full coverage, including liability insurance, collision insurance and comprehensive coverage. If you live in an no-fault state you will also be required to buy personal injury protection (PIP). These coverages guarantee financial responsibility in case of an accident.

Only collision coverage and comprehensive coverage will protect your own car, but not you and your passengers if you are injured. If you don't have health insurance, ask your agent about personal injury protection or medical payments coverage.

What Happens If I Total a Car I'm Financing?

Imagine that you totaled a car you are financing without auto insurance: it would be a nightmare. However, full auto insurance coverage is usually required when you buy a new car, whether you're leasing or financing.

With car insurance, the lienholder or lender would get their money back for the car after the accident that totaled your car, and you wouldn't be responsible to make payments on a total loss (unless you own more than the insurance pay out).

Even though you'd lose the investment you made in the car (down payment and payments made), chances are that you will lose far less money if you did not have auto insurance coverage.

If you did not have car insurance, you'd still have to pay off a totaled car!

Protecting Your Car

You should seriously consider buying collision and comprehensive insurance even when it's not required because financing a car accident can be expensive.

Medical payments coverage and personal injury protection (PIP) may also be helpful because they ensure that you will never pay for costs if you or your passengers suffer injuries. These coverages help pay for hospital and doctor visits and any necessary surgeries related to an accident that is your fault.

What If I Get into an Accident with an Uninsured Driver?

Even though it's illegal in most states, some people drive without any insurance. When you get into an accident with an uninsured driver, or if that person has really low limits that do not cover all of your losses, you will only be covered completely if you have uninsured motorist coverage. Otherwise, you'd have to sue the other driver, who may not have the money to pay for damages. Your car insurance would not cover the legal fees in this instance, but it would cover you if the accident was your fault and the other party sues you.

Will My Personal Auto Policy Cover a Rental Car?

A personal auto policy will usually cover a rental car if you have collision coverage and comprehensive coverage on your policy. If you do not own a car and need to rent a car, first see if your credit card will provide insurance coverage. Only buy rental car insurance at the rental car kiosk as a last resort because it's very expensive.

What Do I Do After an Auto Accident?

It's important to avoid panicking after a car accident because there are many things you need to do, like making sure everyone is safe, calling the police and then contacting the insurance company or your insurance agent.

Follow these steps immediately after a car accident.

Car Insurance Calculator

If you want to estimate how much insurance you need, just fill in the information in SmartFinancial's Car Insurance Calculator. You can also fill out one of our quote forms and compare several auto insurance quotes for free by entering your zip code below.

You're under no obligation to buy auto insurance coverage, but chances are that you're spending up to 30% too much on your current auto insurance policy. See the competitive rates top-rated insurers are offering today.