Why is it important to have auto insurance?
Auto insurance is important because it is financial protection in case you get into a car accident and damage someone else’s vehicle or injure them. Car insurance can also protect your vehicle from damage caused by an accident or a different covered peril, like falling objects, fire, or theft.
If you
don’t have car insurance for you and your vehicle, depending on the state you
live in, you could potentially be breaking the law. Driving without insurance
could result in fines and license suspension. The purpose of having auto
insurance is so you’re able to reimburse others for damage you cause, and so
you won’t get stuck paying out of pocket for the expenses from a car accident
or a different kind of collision, like if you drive into a pole.
Depending
on what type of coverage your car insurance contains, you could be protected
from a variety of perils, such as:
- Fire
- Theft
- Vandalism
- Hail damage
- Animal damage (like if you hit a deer or if rats infest your engine)
Car
insurance is important even beyond collisions and accidents. If your car is
stolen, you can file a claim with your car insurance company and they can pay
to replace your car up to your policy’s limit. But if your car is stolen and
you don’t have car insurance, or if you only have a limited amount of coverage,
you’re going to be stuck paying for a new car yourself.
What happens if you get into a car accident and don’t have car insurance
If
you're in an accident and don’t have car insurance, depending on the state you
live in you may face fines for not having insurance, plus additional fines if
you’re ticketed for the accident.
The
average cost of a car accident can be staggering – in 2013, the average
insurance claim for bodily injury was $15,506, according to the Insurance
Research Council. If you don’t have auto insurance and you cause an accident,
you could be on the hook for paying for all of the damages and injuries.
If you
have auto insurance, your policy would cover the other driver’s medical bills
and the cost to replace their car (up to your insurance policy limits). The law
says that you’re liable for the damages done to another person and their
property in a car accident you cause, so if you don’t have insurance and you
can’t afford to pay for the other driver’s repairs and medical bills, you could
end up in jail, or a court could decide to send a chunk of your paycheck every
month to the person you hit.
What happens if you get pulled over and don’t have car insurance
It is illegal to drive without car insurance in every state except for Virginia and New Hampshire. If you’re driving and don’t have proof of insurance, that’s a problem. And in some states, you don’t even have to get pulled over in order to get caught driving uninsured. Many states actively monitor whether registered vehicles in the state have insurance and issue fines or suspend licenses if they see you have no insurance. States require drivers to have insurance so that you are protected and can afford to pay for damages in the event of an accident.
If you are pulled over, the officer will ask for proof of insurance from your car insurance company. If you don’t have it, what happens next depends on the state you’re in.
If you
get pulled over without car insurance, there are a few things that could
happen:
- You’ll likely be ticketed and receive a fine, which could be hundreds or even thousands of dollars
- Your license may be suspended
- Your car may be impounded
You’ll
need to provide proof of insurance and pay more fees before you could get your
license reinstated and your vehicle back. When you get insurance, you may need
your insurer to file an SR-22 form with your state as a way of proving that
you’re now insured.
What type of auto insurance is important to have?
Every
car insurance policy is actually made up of several different coverage
components, all of which provide important types of protection. Each type of
coverage is important, however not all coverage components are required by law.
Every state has their own rules about how much car insurance is required. Some
states only require liability coverage, which covers bodily injury (BI) and
property damage (PD) you cause someone else. Some states require types of
medical coverage, like personal injury protection (PIP), which covers medical
expenses that you or your passengers incur after a collision.
When
you purchase auto insurance, you choose the coverage you want, plus the limits
and deductibles for each. Though some car insurance coverage is optional, it’s
important to have more than just the basic coverage amounts required by law —
if you are underinsured your coverage might not be enough to pay for extensive
damage or injury.
Below
are the basic components of what’s typically referred to as a “full coverage”
car insurance policy
|
Coverage
Type |
What
It Does |
|
Bodily
injury liability |
The
part of your liability coverage that pays for medical bills if you've injured
someone in an accident |
|
Property
damage liability |
The
other part of liability coverage, covers the cost of property damage you've
caused in an accident |
|
Personal
injury protection |
Covers
medical expenses for you or your passengers after an accident |
|
Uninsured/underinsured
motorist |
Covers
the costs if you're in an accident caused by a driver with little or no car
insurance |
|
Comprehensive |
Covers
damage to your car that happens when you're not driving |
|
Collision |
Covers
damage to your car after a car accident, no matter who was at fault |
Important additional car insurance coverage
Most
car insurance companies offer additional coverage that you can add to your
policy, too. For example, gap insurance provides coverage for people who have
auto loans. If your car is totaled in an accident or stolen, most car insurance
policies will pay you the actual cash value of the car, which could be less
than what you still owe on the loan. Gap insurance pays for the difference
between the actual cash value of the car and what you still owe on the loan.
Roadside
assistance and rental car coverage are also important coverage components to
consider adding to your car insurance policy. This additional coverage can pay
for your car to be towed, cover other roadside emergencies, or pay for a rental
car while yours is being repaired.
