You may be wondering if you need insurance for your car, whether you are buying a new car or trying to save money.
The majority of cases are yes.
In Virginia and Alaska, it is illegal to drive without insurance.
However, without insurance you would still be responsible for paying medical bills, repairs, and other costs if you are in an accident. It’s usually easier and more economical to purchase car insurance. However, how much insurance you need depends on where you live and what your tolerance for risk is.
How much car insurance do I need?
Each state has its own rules about what type of car insurance residents need and how much they should have.
Nearly all states require drivers to have liability insurance. Liability car insurance covers medical expenses, lost wages, and damages you cause to others in an accident. It will not cover your medical expenses or repair costs.
It depends on where you live that you might also need to pay the following:
Uninsured/underinsured motorist coverage: Pays for you and your passengers’ medical costs and car repairs when you’re hit by a driver with minimal or no car insurance.
Personal injury protection coverage (or PIP): Also known “no fault insurance”, PIP covers you and your passengers for medical expenses, lost wages, funeral costs, and other costs, regardless of who was at fault.
Coverage for medical payments, or MedPay You and your passengers are also covered for medical expenses.
Are you unsure of your state’s minimum requirements? For a complete breakdown, check out NerdWallet’s minimum state car insurance requirements. Any state-mandated minimums will be included in most insurance quotes that you receive online or by phone.
Although the minimum coverage required by your state may yield the lowest rates for you, the prices of each insurer can vary greatly. To get the best car insurance price, we recommend that you compare at least three companies.
Do I need more than the minimum?
It can feel like you are throwing your money away when you pay for car insurance. This is especially true for those who have never been in an auto accident.
Misfortune can strike any moment. According to the latest data from the National Highway Traffic Safety Administration, although cars are safer to drive, the number of fatalities due to car-related accidents is on the rise.
. Uninsured people or those with low insurance can be in serious financial trouble after a single accident.
The majority of state minimum requirements don’t cover major car accident expenses. If you are at fault, you will be responsible for the balance.
Let’s take, for example, that you live in New Jersey, and have $5,000 of property damage liability coverage. You are responsible for paying $10,000 if you cause an accident with another motorist and the vehicle costs $15,000 to fix. Don’t forget your car’s repair costs.
Be aware that if you financed or leased your vehicle, your lender may require you to have collision and comprehensive coverage in addition to any state-mandated minimums. These coverage types cover repairs and replacement of your vehicle in the event of an outside cause.
Cover your net worth
You are legally responsible for any accident you cause while driving. Therefore, you need to have enough liability insurance to protect your net worth in case you are sued.
To calculate your net worth , subtract your total debt (mortgage and credit card balances) from all assets (houses, cars and cash in the bank, and investment accounts).
Even if your net worth is small, you may not need to meet the minimum state car insurance requirements. However, you don’t have to buy car insurance that covers your medical and car expenses if you are found responsible for an accident or other mishap.
What happens to me if I don’t have insurance?
There are different penalties for driving an uninsured car, depending on the state and number of prior offenses.
You could face the following consequences if you get caught behind the wheel of a car without insurance:
Fines up to $5,000
Suspended driver’s license.
Suspended vehicle registration.
Increases in insurance rates.
Is it legal to drive without insurance in
You can drive without insurance if you reside in one of these states and you meet the requirements:
Virginia Pay a $500 yearly fee to Virginia Department of Motor Vehicles
You can drive legally without insurance even if you don’t reside in Virginia or Alaska. If you can show “financial accountability” by filing a certificate of deposit, bond or other cash deposit with your state, you may be able to drive without insurance. There are two requirements: Florida requires a $30,000 bond or cash deposit, while Nebraska requires a $75,000. New Hampshire requires large amounts of money to prove financial responsibility. However, this is only if you are found at fault in an accident.
Note: You will need to own the vehicle in these cases as almost all lenders require full coverage insurance.
The easiest and most popular way to show financial responsibility to your state is to purchase car insurance. It’s usually cheaper and easier to pay a monthly premium rather than a large lump sum or risk your entire savings.