Who needs auto insurance?

Updated: 9/19/2023
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13y ago

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Anyone who owns or operates a car needs auto insurance. This is for at least 2 main reasons:

1. Most States have "financial responsibility laws" which require the maintenance of certain types and amounts of auto insurance. The main type of insurance with which the law is concerned is liability insurance. This type provides a source of benefits for the payment of the other party's damage or injury if you are At Fault for the collision.

The State may also require "personal injury protection" coverage that pays a portion of your own medical bills and lost wages in the event of a collision, regardless of fault. This is so-called "no fault" insurance.

2. If a car is financed through a third-party, such as a bank, the vehicle is usually collateral for the loan. Therefore, the lender usually requires physical damage insurance on the car so that there is a source of funds with which to repair the car in the case of a collision. In that way, the value of the car is retained and the lender remains secured.

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