You’re legally required to have auto insurance to drive on every public street in the United States. There are no exceptions to this rule.
The type of auto insurance required by law, however, varies between states. Some states require only a bare-bones insurance plan with $10,000 in liability coverage, for example, while other states require ten times that coverage. Furthermore, a small number of states allow you to drive without a formal insurance policy – but only if you’re able to prove you have adequate cash reserves to cover any liabilities.
Why Is Car Insurance Mandatory?
Car insurance is a mandatory expense for every driver in the United States. In fact, virtually every country in the world requires its drivers to have some type of car insurance.
The answer is simple: you can do significant damage while driving a vehicle, and somebody has to pay for that damage. Without car insurance, general society would have to pay for every car accident.
Car insurance has been required in the United States since the early days of the automobile. States realized early that car crashes led to massive damage – including property damage and bodily injuries. Massachusetts and Connecticut were the first states to require drivers to have car insurance all the way back in 1925. Most states followed shortly thereafter.
Do All States Require Car Insurance?
49 states require all drivers to have car insurance in order to legally drive on any public road in that state.
The only exception is New Hampshire, which doesn’t specifically require you to have a formal car insurance plan – it just requires you to prove you can pay for any damages you might cause while driving. That means drivers in New Hampshire – especially wealthy drivers – can opt out of the insurance system by posing a bond or cash equal to the amount of damage caused in the crash.
Aside from a single unique situation, car insurance is required in every state in the United States. However, the types of mandatory car insurance vary widely between states and jurisdictions.
What Type of Insurance is Required?
Liability insurance is almost always mandatory. This is the most basic level of car insurance. Liability insurance protects other people and their property. It does not protect yourself or your vehicle.
Insurance plans are typically listed by three numbers. When comparing insurance plans, for example, you might see numbers like 100/300/100.
The first two numbers refer to medical coverage: your policy will pay $100,000 to cover the medical expenses of each person involved in the accident, up to a maximum of $300,000 per accident. The third number, meanwhile, covers property damage. The policy covers $100,000 of property damage – like damage to the other vehicle – per accident.
No states require 100/300/100 plans. Instead, most states have a minimum requirement around 20/50/15. Some states lower the limit to as little as 10/30/5.
What’s Included with a Minimum Car Insurance Policy?
Your minimum car insurance plan does not cover damage to yourself or your vehicle. It covers damages you inflict on other people and other property. Minimum car insurance plans include four basic types of coverage. Some states require all four types of coverage, while others do not:
Bodily injury liability: Bodily injury liability refers to the first two numbers of the plan. Coverage is defined per person and per accident. Most states require bodily injury liability of at least $10,000 per person and $30,000 per accident.
Property damage liability: Property damage liability is defined per accident. It covers damage to other vehicles and property. Most states require property damage liability coverage of at least $15,000 per accident.
Personal injury protection (PIP or no-fault): Coverage is defined per person and per accident. PIP insurance, which is required in some states, can cover medical expenses, disability, loss of income, rehabilitation expenses, and other costs.
Uninsured or underinsured motorist protection: Required in some states, uninsured or underinsured motorist protection covers accidents involving drivers with no insurance – or inadequate insurance.
Most states only require the first two types of coverage – bodily injury liability and property damage liability. Other states require all four types of coverage.
What’s the Minimum Insurance Requirement in My State?
Each state has different insurance requirements. The Balance has a great list of state-by-state insurance requirements here.
Compare insurance quotes in your state to determine how much insurance coverage you need – and how much you can afford. Insurance companies typically offer “bare minimum” insurance plans along with more comprehensive plans, making it easy to shop for the best plan for your needs.
Driving without insurance is illegal in almost every state. If you own a car and want to drive on public roads, then you’ll need to have insurance. The only “exception” is New Hampshire: drivers in New Hampshire can maintain a cash reserve as a substitute for car insurance. However, this option is typically only available to high net worth individuals. The rest of us are required to have a certain minimum level of auto insurance coverage.