Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 14, 2021

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In a nutshell...

  • Having an active insurance policy on your car is important for several different reasons
  • One of the most important reasons you should carry active insurance is that almost every state has compulsory auto insurance laws
  • When it comes to your vehicle, car insurance can help you avoid the financial burdens that come up when your car is damaged in an accident or by incidents not related to a collision
  • For other drivers on the road, it’s important that you can provide financial restitution for property damages or bodily injuries that you may be responsible for
  • Car insurance may also help protect your financial interests in the event your car is damaged in a hit-and-run or by an uninsured or underinsured motorist

Having active insurance on your car is almost a necessity due to the heavy reliance on cars our country has. Many people use their car at least five times a week, meaning that there are several chances for an accident or an incident to occur.

The financial ramifications of these incidents can be enormous, and many states require drivers to carry car insurance due to this.

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Car Insurance Protects You When Your Vehicle Is Damaged

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When your car is damaged, your first thought is often of repairing or replacing it. Having car insurance on your vehicle may help you get your car repaired or replaced, depending on the extent of the damages and your car’s value, without breaking the bank.

Damage could come through a variety of means, including:

  • A collision
  • A hailstorm
  • A rodent chewing through your car’s wiring

Car insurance is designed to protect you and your car from losses above and beyond the normal wear and tear that occurs.

This means that your car insurance often takes effect when you’ve been involved in a collision with another vehicle, or if you’ve had a covered incident occur that caused damages to your car.

If you have an active policy on your car that carries collision and comprehensive coverage, then you may be covered for these damages.

In many situations, collisions are covered by the collision coverage on your auto insurance, while damages that are not caused by a collision are covered by comprehensive coverage.

These coverage options traditionally carry a deductible, which is the amount of the loss you are responsible for before your provider steps in. This helps ensure that you file claims when necessary and when they exceed the limit of your deductible amount.

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Car Insurance Protects Other Drivers On The Road If You Cause An Accident

In addition to covering your property in the event of a loss, car insurance serves another important function, protecting the property and physical wellbeing of others on the road.

When you have car insurance, your policy will normally come with liability coverage for bodily injury and property damage. This is coverage for bodily injuries or property damages that you are responsible for.

When you are determined to be at-fault for an incident, the other party or parties involved may file claims against your insurance policy to repair or replace their vehicle as well as for any medical payments they incurred due to the incident.

Your insurance policy normally provides coverage up to the policy limits you’ve selected. Without an active insurance policy, you would be financially responsible for the entire loss amount.

Also, some accidents may require review and settlement through the legal system, which can amount to large amounts of fees. In the event of a court case, your insurance provider may help cover these costs and fees, up to your policy limits, until the claim is resolved.

It’s important to remember that you will still be responsible for fees above and beyond your policy limits.

Car Insurance Protects You From Uninsured Or Underinsured Motorists

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Another threat that your car insurance can help protect against is damages caused by uninsured or underinsured motorists. These motorists account for one in eight drivers on the road, meaning that your car and your well being is at risk more frequently than you may realize.

Your car insurance may help protect you, your vehicle, and your loved ones in more ways than you are aware of.

One of the most common uninsured accidents is a hit-and-run accident, where your car is damaged but you do not know by whom.

In these situations, your car insurance may provide protection to you under your uninsured/underinsured motorist coverage as long as you’ve selected this option.

Additionally, if you are involved in an accident with an uninsured or underinsured motorist, and you or your passengers are injured, your insurance policy may provide coverage under different policy terms depending on your state and which options you have selected.

It’s important to speak to your insurance provider about your coverage options and what situations you may still be at risk in, so you can prepare appropriately.

Car Insurance Protects Those Traveling In Your Car

Some insurance providers may allow you to purchase medical payments coverage or personal injury protection, which protects not only you but any passengers in your vehicle as well.

This coverage option provides assistance, up to any policy limits, for medical expenses that occur as a result of a covered loss.

This coverage may also extend to other covered expenses, such as the lost wages that you or a passenger incur due to a covered incident.

This may also cover replacement costs associated with labor that someone injured in the incident normally performed. In the unfortunate event of death due to an incident, this coverage may also provide coverage for funeral expenses.

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Car Insurance Is Legally Required In Almost Every State

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One of the biggest reasons you should have insurance on your car is that almost every state has compulsory auto insurance laws; meaning you are required to carry insurance on your car.

Most states have enacted these regulations regarding insurance coverage to protect not only you but the other drivers and passengers on the road.

If you find yourself involved in an accident and do not carry state-required insurance coverage, there may be repercussions depending on your state.

For instance, you may receive a citation and a fine, or you may find your vehicle’s registration suspended until you pay a fine and provide proof of insurance to get your registration reinstated.

It’s important to remember that the penalties for first-time offenders and repeat offenders may vary, and each state has different tolerance levels for failing to carry compulsory auto insurance.

In some instances, you may find your driver’s license being suspended after repeated offenses. This may be a short-term or long-term suspension depending on your state’s legislation.

Conclusion

Having car insurance is not a necessity just because most states require it. By helping to protect your financial interests and your physical well-being, car insurance plays an important part in the structure of trust and responsibility you have in others driving on the road.

It’s important to remember that auto insurance exists to help you recover from losses above and beyond the norm; it does not exist to cover your car’s maintenance costs or other costs associated with your car’s upkeep.

If you make major physical or mechanical upgrades to your car, speak to your insurance provider about your current policy and if it will provide adequate coverage to your upgrades.

If you have questions or concerns about your insurance coverage, such as if your policy limits are adequate or what is required in your state, speak to your insurance provider.

If you do not have a current insurance provider, your state’s Department of Insurance may be able to provide more assistance regarding state requirements for insurance as well as helping you to locate providers that service your area.

See how much you could save on car insurance by comparing quotes today!