Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jun 3, 2020

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Here's what you need to know...

  • Every state requires car insurance or proof of financial responsibility
  • Car insurance is a much cheaper way of affording proof of financial responsibility
  • With insurance, you have the option of purchasing additional coverage to protect your assets

Why do you have to have insurance on a car? What is car insurance and why is it important? If you find yourself wondering why you should buy car insurance, the answer includes several reasons.

Two of the biggest reasons to buy car insurance are that it is required by law, and without car insurance, you could risk great financial loss.

If you don’t have car insurance, you must have proof of financial responsibility.

Proof of financial responsibility typically comes in the form of a surety bond or cash deposit that is left with the state Department of Insurance or the Department of Motor Vehicles.

Do not be caught driving without car insurance. Enter your ZIP code to find great comparison rates on insurance today!

Table of Contents

The Legal Requirements

 

The proof of financial responsibility that is required by the state has to equal the amount of the minimum liability coverage required by the state.

Liability pays for another person’s bodily injury or property damage if you are at fault for an accident.

Each state dictates how much money you need to cover expenses for bodily injury for one person, bodily injury for multiple persons combined, and for all property damage that occurs.

If the state requires $10,000 for a single person’s injuries, $20,000 for all combined bodily injuries, and $15,000 for property damage, then you will probably need to provide proof of financial responsibility in the amount of $35,000.

Unless you have the amount required by the state to purchase a surety bond or to leave as a deposit, you will need to buy car insurance.

When you buy car insurance, you can pay for the coverage limits, such as 10/20/15, and instead of paying a lump sum of money upfront, you only need to pay for your monthly premium.

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The Financial Protection

In addition to satisfying a legal requirement, there is another important reason as to why buy car insurance.

Car insurance gives you the financial protection that you most likely can’t afford on your own.

If you only buy the state’s minimum liability requirement then you leave yourself open for financial loss.

Your insurance will only pay out based on the policy limits, so if the accident costs more money than for what you are insured, you will have to pay for the difference out of your pocket.

Furthermore, if you don’t buy car insurance for collision, then you will not receive any compensation for damages incurred by your own vehicle if you are at fault for the accident.

If you buy comprehensive car insurance, you will have the added benefit of coverage for your car for most non-collision-related incidents as well.

Without car insurance, you are responsible for paying for car repairs, car replacement, and/or medical expenses by yourself.

Buy Car Insurance Online Cheap and Fast

 

In order to minimize your financial losses resulting from either an accident or from a non-collision related event, you should have complete car insurance.

Liability, collision, and comprehensive car insurance are considered full protection.

There are other types of insurance you can add to your policy to give you more benefits. These policies may include towing, car rental, and even customized equipment.

Now that you know the benefits of car insurance, buy coverage and save money by comparing rates. Just enter your zip code to start receiving your car insurance quotes now!

References:

  1. http://www.naic.org/state_web_map.htm
  2. http://www.dmvnv.com/50_state_dmv_list.html
  3. https://www.allstate.com/auto-insurance/liability-coverage.aspx
  4. https://www.libertymutual.com/auto/car-insurance-coverage/collision-insurance
  5. https://www.progressive.com/glossary/comprehensive-and-collision/