Is car insurance required?

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Car insurance is one of the most important types of insurance because it doesn’t just protect you. It also protects other people. That’s one reason why this type of insurance generally isn’t optional. Why is car insurance required? Statistically speaking, driving is a risky business and can be fatal. For the privilege of driving, you must show you are financially responsible enough to cover for any damages you may cause. 

Is car insurance required in every state? No, but all states have financial responsibility laws— meaning you must be able to demonstrate that you have enough assets to cover for medical bills or pay for damages should you be at fault in an accident. 

Most people opt for insurance to meet the requirement. Learn about what kind of car insurance is required to make sure you’re following the law.

How much car insurance is mandatory? 

Is insurance mandatory for most states? To a certain degree, yes.

Each state has a liability minimum that drivers must reach. Liability covers the costs of another person’s property or physical injuries should you be at fault. However, the minimum is different for each state. 

Generally, insurance is written with slashes to distinguish the types of insurance. The first section is bodily injury per person, the second is bodily injury per accident and the third is property damage liability by accident.

Here’s a sampling of states across the U.S. 

StateLiability minimum
New Hampshire$25,000/$50,000/$25,000
New Jersey$15,000/$30,000/$5,000
New Mexico$25,000/$50,000/$10,000
New York$25,000/$50,000/$10,000
North Carolina$30,000/$60,000/$25,000
North Dakota$25,000/$50,000/$25,000
Rhode Island$25,000/$50,000/$25,000
South Carolina$25,000/$50,000/$25,000
South Dakota$25,000/$50,000/$25,000
West Virginia$25,000/$50,000/$25,000

Some states also have a few other requirements such as uninsured/underinsured motorist coverage. Check your state’s laws for the specifics. A few states also let you get out of having insurance if you have proof that you have enough assets to pay for damage.

Collision and comprehensive insurance aren’t listed because they’re optional. You are not required to have either in any state (though it is highly recommended). 

Collision insurance pays for any damages received in an accident with another car or in a collision with another object, such as a fence, road sign or tree. 

Comprehensive insurance covers any damages not received in a collision with another car. Should your car be damaged by a thief, vandal, fire or some type of wildlife (such as hitting a deer), a comprehensive policy will pay for any damages up to the policy limit. 

What is a no-fault state?

In a no-fault state, it doesn’t matter who causes an accident. Each person is compensated by his or her insurance company. The idea is to lower the cost of insurance by limiting a person’s ability to sue. Accidents and injuries must meet a certain threshold before a person can sue for any damages.

No-fault states include:

  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Pennsylvania
  • Utah

Each of the above states require you to have personal injury protection. This type of insurance covers you and any of your passengers in an accident no matter who is at fault. 

For example, say you’re in a parking lot with your partner, and while you’re backing out a car t-bones you, causing both you and your partner to need hospitalization. With personal injury protection, your insurance would cover your medical expenses and any lost wages that were a result of the accident.   

What happens if I do not have insurance?

Driving without insurance is considered a crime and can result in severe penalties, such as:

  • Loss of driver’s license
  • Jail time
  • Fine
  • Community service
  • Registration suspension
  • Car impound
  • Confiscation of license plates 

However, what specifically happens depends on the state

For example, in Alabama you would pay a fine up to $500 and lose your registration. In Georgia, you would pay a fine of up to $1,000, temporarily lose your license and registration and could go to jail for up to a year.

What happens if I get into an accident without insurance?

If you get into an accident without insurance, you will need to pay for all damages out of pocket if you are at fault. This is in addition to the penalties listed above, such as jail time, fines and losing your license and registration. 

You would also be at risk of being sued. If you are, any assets you have would be forfeited to the injured party if you don’t have the cash to pay for damages. So if you have a business or home, you could lose them. 

What if someone hits your car and you do not have insurance?

If someone hits you and you do not have insurance, the person at fault still pays for any damages incurred. 

However, depending on what state you’re in, you may be limited in whether or not you can sue. Called “no pay, no play” laws, these laws prevent you from suing for noneconomic damages such as pain and suffering if you are uninsured at the time of the accident. 

Alaska, California, Indiana, Iowa, Kansas, Louisiana, Michigan, Missouri, New Jersey, North Dakota, and Oregon all have “No Pay, No Play” laws in place. 

It’s always best to have car insurance, even if it is just your state’s minimum liability. Should you need to go to court, you will at least have the ability to do so. 

The takeaway

So, is car insurance required? For most people, the answer is yes. Even when it’s not required, it’s a good idea because to have so you don’t have to worry about paying out-of-pocket if you get in an accident.

Lauren Ward

Lauren Ward is a writer for She specializes in all things personal finance, including insurance, loans, and real estate.

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