A car insurance premium can be a strain—or least an annoyance—on anyone’s budget. In times of economic stress, that strain is heightened. And in times like these, when economic pressures combine with people being quarantined because of the COVID-19 virus, auto insurance coverage feels downright unnecessary.
If you’re feeling frustrated and asking why car insurance is mandatory in almost every state, you’re not alone. There are good reasons for the legal requirements to purchase and maintain auto insurance coverage.
Car insurance is broken down into several components that allow drivers to determine the level of risk that’s appropriate for them. One component is liability coverage—what you may owe another driver if you are at fault for an accident.
There’s collision coverage, which deals with damage done to your vehicle. There is uninsured motorist protection, which addresses damages if a rogue driver operating outside the law causes your accident. Finally, there is your deductible, the amount of money you pay out-of-pocket before insurance coverage kicks in.
Of all these elements, mandatory auto insurance primarily deals with liability coverage—your responsibility to another driver. It’s understood that most people will get into an accident at some point in their lives and that even the most responsible drivers can make a mistake that will put them at fault. That’s reasonable. What isn’t reasonable is not being able to compensate the other party for damages caused.
Those damages include not just that done to the vehicle, but any medical costs and expenses that come from needing to miss work or undertake rehabilitation. In short, it can add up to a lot of money that few people have on hand.
It’s the liability component of driving a car that makes auto insurance different than health insurance, another area where compulsory coverage—its wisdom and constitutionality—is hotly debated. With healthcare, it’s accepted that individuals can choose to take the financial risk of being uninsured because it doesn’t affect anyone else.
While proponents of compulsory health insurance argue that this still shifts costs to the rest of society, that is an indirect shift—unlike auto insurance, where a person’s liability is direct.
Thus, 49 states mandate that individuals buy car insurance. The only exception is New Hampshire; it requires that those who opt out of the insurance system provide proof of an ability to pay.
Massachusetts and Connecticut were the first states to enact compulsory car insurance laws, all the way back in 1925 when the automobile was just getting traction in the American market. To this day, each state’s requirements are different. Your insurance agent will ensure you are in compliance with your state laws.