Why Is Car Insurance Mandatory?

Why Is Car Insurance Mandatory?

All states in the country have financial responsibility laws that require drivers to prove they have assets to cover damages if they’re responsible in a car accident — and car insurance is how most people meet these requirements. Many people understand that having car insurance is just part of having a car. But if you’ve ever wondered why car insurance is so important, you’re not alone.

A Brief History of Car Insurance

According to the Insurance Information Institute, automobile insurance laws began during the 1920s in Massachusetts. The automobile was gradually becoming the preferred mode of transportation. More drivers meant more accidents, vehicle damage, property damage, and personal injury—and more money to fix everything!

Auto insurance was created and mandated to help protect drivers against unforeseen expenses related to car accidents and their aftermath. However, it took almost three decades for other states to follow Massachusetts' lead and begin officially recognizing the benefits of mandatory auto insurance. New York was the first state to follow suit, and North Carolina came soon after. By 2010, auto insurance was a requirement in 49 states and Washington D.C..

Why Car Insurance Is Mandatory

1. It makes financial sense.

States mainly require car insurance because of liability—a driver's responsibility to cover the cost of any damages they cause. For example, if you're found to be at fault for an accident that totals another person's car, you could be responsible for paying for that loss and for any medical bills the other person has because of the accident. Liability insurance steps in to help cover these costs, so you don't have to pay thousands of dollars out of pocket.

Additionally, insurance coverage can sometimes help you cover personal expenses if you're in an accident with an uninsured motorist or a single-vehicle wreck—but usually only if you protect your car with more than your state's minimum insurance requirements.

Think car insurance is too expensive to buy more than legally required? Automobile accidents aren't cheap. We did the math. On average, it costs more than $3,000 to repair a vehicle after a crash according to the Rocky Mountain Insurance Information Association. But as CBS News notes, nearly 40% of Americans can't afford an emergency expense of $400. That's one reason it makes financial sense to have car insurance. The right policy can get you and your car back on the road sooner.

2. It protects everyone on the road.

Automobile liability insurance protects at-fault motorists from the financial fallout of the accidents they cause, and it protects victims of crashes from having to pay for property and health damage inflicted by someone else.

But, what would happen if insurance wasn’t legally required? In a world without automobile insurance, society would likely have to pay for the consequences of those accidents, maybe with higher taxes or some other kind of fee. Uniform insurance laws help put all drivers on an equal level.

How Do States Enforce Car Insurance Laws?

According to Statista, the U.S. has roughly 225 million licensed drivers. With so many cars on the road, it’s no surprise that states have turned to technology for help enforcing traffic laws.

An increasing number of police departments use something called automatic license plate recognition (ALPR) cameras. These cameras can “read” license plates. They then look for them in a database of uninsured vehicles.

Many states such as Texas, Washington, and Mississippi have pioneered the use of ALPR technology to crack down on uninsured motorists. Depending on the state, drivers violating car insurance laws face significant penalties — ranging from traffic tickets to jail time.

What Are the Car Insurance Requirements in Your State?

Visit our state-by-state car insurance guide to check out the legal minimum in Alabama, Arkansas, Florida, Georgia, Mississippi, North Carolina, Ohio, South Carolina, Tennessee, Texas, or Virginia.

Saving Money on Mandatory Car Insurance

Automobile insurance is a must have, but that doesn't mean you have to pay an arm and a leg for it. You have options. Insurance requirements differ from state to state. Many times people pay for coverage they don’t need. Sometimes, people’s situation changes, yet they don’t reevaluate their policies!

Cheap car insurance can provide everything you need. Work with a knowledgeable partner like Direct Auto to get the right coverage for your state and situation. Call, click, or come into your local Direct Auto today!

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Why Is Car Insurance Mandatory?