Most states legally require drivers to keep auto insurance coverage. Insurance protects you financially by providing coverage for you and your passengers if you are in a crash.
There are different kinds of auto insurance policies that cover different things. The benefits of car insurance may depend on the type of policy you buy. Liability coverage will help you pay for covered losses related to the other party, such as medical expenses and vehicle damages, if you are at fault in a collision.
MoneyGeek breaks down why auto insurance is important, its purpose and the different types of coverage you may need.
Table of Contents
The purpose of auto insurance is to protect against possible financial loss if you are in a covered incident.
There are different types of auto insurance policies with varying coverage options. The best type for you will depend on your needs and circumstances.
Most states legally require drivers to have auto insurance. Each state has its own minimum coverage requirements.
Why Is Auto Insurance Important & Why Do I Need It?
Having auto insurance helps protect your finances so that you don’t have to pay out of pocket for damages resulting from a crash. Coverage may help pay medical and legal fees. Keeping insurance also prevents you from facing legal consequences for not having insurance.
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Car Insurance Is a Requirement in Most States
Most states require state minimum car insurance coverage by law. It is important to find out if you live in a no-fault state. If you do, you will have to pay for your injuries and damages regardless of who is at fault in a collision.
You should also evaluate your needs and circumstances to determine how much car insurance to buy. The best policy will vary per person. For some, the state minimum may not be enough.
It Helps Give You Financial Protection
Typically, the person who caused the accident will be held liable for its expenses. If you do not have coverage, you would likely need to pay all costs out of pocket. In no-fault states, each party is responsible for their own expenses.
How Insurance Protects You Financially
Car Insurance Protects You and Your Passengers
Auto insurance may protect anyone who drives your car. Depending on the coverage you choose, you can have additional protection, like roadside assistance.
Some insurance companies also offer rewards. Typically, driving safely or having safety features in your car could make you eligible for significant discounts.
Standard Insurance Coverages You May Need
For states where auto insurance is a must, there is a minimum coverage requirement. While this varies depending on the state, it typically includes bodily injury liability and property damage liability. However, there are other insurance types you may want to consider for more coverage, like comprehensive and collision.
Types of Auto Insurance
Bodily Injury Liability
Property Damage Liability
Personal Injury Protection (PIP)
Uninsured/ Underinsured Coverage
Comprehensive Auto Insurance
Collision Auto Insurance
Car Insurance Coverages You May Want to Add
Apart from the usual car insurance coverage, you may also want to consider additional coverages. Keep in mind that these are optional and may require you to pay extra. These types of coverage also depend on the car insurance provider.
Auto Insurance Add-Ons
New Car Replacement
Rental Car Insurance
Frequently Asked Questions About the Importance of Car Insurance
Auto insurance offers various benefits. MoneyGeek answers some of the frequently asked questions to help you better understand the importance of auto insurance.
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