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Do I Need Car Insurance? If So, Why?

Written by Doug Cohen

Why You Need Auto Insurance?

Many people wonder why insurance is necessary. Aside from state laws, the reasons why you will need to carry insurance coverage include being able to legally purchase and drive a new car. Under current laws in most states, you canít buy a vehicle and drive it off the lot without furnishing proof of insurance. In most cases you wonít even be able to arrange financing without proper coverage. You may be required to show proof of insurance to your lender in order to qualify or get approval for the loan amount, or you may be required to show proof before the carís title can be legally transferred into your name. Sometimes you are required proof of insurance in both instances.

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Before you are approved for any auto loan, you are required to carry the specific types of insurance specified by the bank, so itís important to get a list of required coverages before shopping for a car insurance company. If you lack complete coverage as required by law and your finance company, the purchase of your new car could be delayed.

Some people find ways to cheat the system and drive without proper insurance. Any time you operate a vehicle without the required coverage you risk your driverís license. Aside from the obvious risks of an accident, there are also random police stops, DUI checkpoints and other ways state laws permit the authorities to check driver compliance with state insurance laws. You may be able to get away with driving without insurance over the short term, but the law of averages says you will find yourself in a situation where proof of insurance is needed sooner or later.

There are plenty of other reasons to carry insurance. Ensurance.com president Doug Cohen believes itís an important part of the social contract, similar to voting and other civic duty. "One reason to have insurance is because it makes you a more socially responsible person. By having insurance you make it financially safer for all of us; in the event you damage someone's car or injure them with your car, you essentially have a savings account waiting to help make that person financially whole again." Auto insurance protects your interests, but it also protects other people.

That savings account doesn't just protect the other driver in an accidentóit keeps you from being personally liable after an accident. Because police investigations can assign a percentage of blame to both parties, you may find yourself liable for your share of the accident even if it wasn't your fault. This requires you to pay up for the amount of damages the police report and/or insurance investigatorís report specifies. Do you have enough money saved up to pay for your share of an accident? Cohen points out, "If no one bought insurance, then we would all likely end up in court somewhere suing each other for repair bills and enormous medical costs. By everyone having car insurance, we are a more socially and financially responsible society."

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