Have you ever crashed into a limousine?
I have.
Image Source: Chris Butch
Fortunately, I saw him brake in time, so no one was hurt. And since the limousine was empty, except for the driver, no one missed the prom.
The driver and I had a heartfelt chat, he was quoted, and his insurance company paid out the money. And besides the good story, this whole episode gave me a strange and unexpected assessment of auto insurance.
Because even with a simple collision of wings, without autobelay, the whole scenario could crash. all much uglier.
So why do we need car insurance? Why do states prescribe it? (And is it worth paying for in two states that don’t require it?) How auto insurance protects our home and, yes, even our relationships, and why we should glad buy it?
Whether you’re wondering if you need to renew your policy or just curious, let’s take a look at 7 reasons why you need auto insurance.
one. It is required by law (in all but two states)
The #1 reason you need car insurance is because you have have it. If you are caught without a car insurance policy, you could face a hefty fine or even jail time.
In Georgia, for example, under state law, driving a car without insurance provides for the following sanctions:
- First time: 60-day suspension of your license and vehicle registration and, depending on the circumstances for which you were stopped, up to 12 months in prison.
- Second time: 90-day suspension of your license and vehicle registration, an $85 fine, and a higher chance of a judge putting you in the clinch.
- Subsequent times: Same penalty as the second crime, plus an even higher chance of going to jail as well as suspend your driving license in Georgia permanently.
Yes, law enforcement is not very forgiving of uninsured motorists.
It should also be noted that the government UN-suspend your license until you provide proof of insurance coverage, and purchase insurance for a suspended license crazy expensive. SR-22 insurance, as you know, can cost from 150% to 400% of the cost of a regular policy.
Letting insurance companies swindle your SR-22 car insurance is a “hidden fee” for driving without insurance that can cost you over $10,000 in additional premiums before your points expire.
Not worth it!
Two states where driving without insurance is…legal?
There are actually two US states where you can legally drive without insurance.
- Virginia allows you to skip the state’s minimum requirements if you either a) pay $500 for an uninsured driver’s fee each time you renew your vehicle registration, or b) post a cash deposit, i.e. a large pile of cash, to prove you can pay out of pocket in case of an accident.
- New Hampshire also does not require you to have auto insurance if you can “demonstrate that you are able to provide sufficient funds” to cover the costs of a faulty accident, according to NH.gov. Fortunately, very few people have chosen the perverse logic of saying they are “too rich to pay for insurance” – New Hampshire has one of the lowest rates of uninsured drivers in the US at just 6.1%.
Even if you live in these states, you definitely still want car insurance for the rest of the following reasons.
2. To compensate someone else for the accident you caused
The government prescribes car insurance for the same reason as seat belts; both devices protect us from catastrophic scenarios.
Let’s say you’re in a car accident. You tried to leave Chipotle during rush hour, but you didn’t see a car speeding down the right lane and it crashed into you. This is an honest mistake and it happens every day.
Both cars are wrecked, the other driver and her passenger have neck injuries. In a world without car insurance, another driver and her passenger can sue you for 100% of their medical expenses, loss of use, vehicle damage and more. You will be lucky if your total bill is less than $100,000.
That’s one expensive burrito – and we haven’t even factored in the cost of repairing or replacing your own a car.
It is important to note that in the scenario where an uninsured driver causes an accident, every screwed up – not just the uninsured driver.
- Accident victim cannot access the funds they need, so their interest-bearing debt piles up (and destroys their credit rating).
- guilty driver must wait for the financial ax to fall when personal injury law comes into play and some ambulance stalker multiplies his victim’s compensation due (and their commission).
- Government must dedicate courtroom time, public lawyers and tax dollars to the inevitable nasty legal battle between drivers. They must also pay out of their own pocket for damage to public property such as fences and barriers.
The only winners in the uninsured case are the lawyers. Everyone else is in the tens, if not hundreds thousand dollars – and the life of at least one person is actually over.
The tragedy is that this whole situation could have been avoided if the uninsured driver had just paid $1,000 for a 50/100/50 insurance policy ($50,000 personal injury per person, $100,000 personal injury per accident, $50,000 dollars of liability for property damage).
This why do governments prescribe insurance.
3. To compensate you for an accident caused by someone else
On the other hand, when someone hit you yetyou’ll be glad the government required them to have insurance.
Because if you get hit by an uninsured driver, it can take a long time, long time to get the money you are entitled to. At the same time, you’re paying repair bills, medical bills, and more—both your credit history and your sanity are at stake.
That’s why they call it liability coverage. The other driver is *responsible* for damage to your vehicle (liability coverage) and your medical bills (personal injury coverage).
That’s why governments not compulsory collision insurance or comprehensive insurance; frankly, they don’t really care if you damage your own stuff. They just want to make sure you can cover for someone. stranger accounts (including your own).
However, you may want to get collisions and all-around coverage for reason #4!
4. To fix your car – no matter who caused the accident
Every driver needs liability insurance, but only a few need accident and hull insurance.
- Collision insurance helps cover the cost of repairing/replacing your car if you cause an accident or if the other driver’s insurance does not cover the cost of your repair (or does not exist at all).
- Comprehensive insurance covers damage to your vehicle due to “accidents” such as vandalism, theft, flooding, falling trees, roaming deer, alien invasion, etc.
Do you *need* Collision and Comprehensive Insurance?
It all depends on your answer to a simple question: if your car gets seriously damaged tomorrow, will you be able to pay out of pocket for a repair or even a replacement?
Otherwise, pre-purchasing collision and comprehensive insurance can bring peace of mind and prevent a big financial burden. This especially true if you depend on your car for your personal health or income.
If your car isn’t worth that much and you have several thousand to repair (or even replace), you can safely opt out of collision and comprehensive insurance.
Finally, if you cannot pay out of pocket for a car repair/replacement, but you could live without it for a while, you can also be fine without collision and comprehensive. They don’t come cheap, after all, and a couple can easily add about $500 to a six-month bonus.
Oh, and one last thing: collision protection is also a good idea for your rental car. Fortunately, your bonus card can include it for free. Check cardholder benefits for a “Collision Damage Disclaimer” or something similar.
five. To protect your assets
Let’s say you caused a $50,000 accident, but you only have $5,000 in your bank account. The other driver’s attorneys can legally seize additional assets in your name to cover your debt.
It could be your investment, your car, or even your home.
Yeah; you can lose your home in the bend of a wing.
Remember, liability insurance does not protect you; it protects your net worth. It creates a “buffer zone” between the compensation due to the victim and all your belongings.
This is why when you buy a house, you must increase your auto insurance limits. 50/100/50 is a much wider buffer zone to protect your home equity.
6. To help cover for your passengers
If you are convicted of an accident, you are also responsible for paying your passengers’ bills.
This may include both property damage and medical expenses. Let’s say, for example, you’re taking a friend to a photo shoot, and he has a bunch of expensive photographic equipment in his trunk. You cause an accident, they get injured and their belongings are destroyed.
You are responsible for their medical bills as well as replacing your fancy equipment.
At this point, would you rather say:
Don’t worry, I have insurance.
Or
“Sorry dude, I have no idea when I can repay you.”
It may sound melodramatic, but it’s objectively true: auto insurance protects friendships!
7. It brings peace of mind to everyone
The final reason you need car insurance is because it brings peace of mind to everyone.
How would you feel knowing that every time you leave the house you could be hit by another driver and stuck with $136,261 in bills until the other driver pays you back?
I would be afraid to leave the house, TBH. I would sell my cars and start saving for a helicopter.
I prefer a system where everyone must have insurance, especially with so many brainless drivers on the roads these days. Car insurance doesn’t make them better drivers, but does make sure you don’t fall victim to their negligence.
Conclusion
Insurance can sometimes seem like a scam, but it really does make the wheels of society turn. He cultivates peace of mind, protects livelihoods, and keeps our courtrooms clean.
While you are here, if you are looking for the best insurance deal, check out the best car insurance companies for young adults.
Featured Image: Lyudmila Solovieva/Shutterstock.com
