Why Do People Need Car Insurance?
when you buy a car, you have to buy car insurance. Car insurance protects you from financial loss and liability. There are several reasons why people may need car insurance, including the fact that it is legally required and that it can save you from financial ruin.
Legal Requirement
- People need car insurance because the law dictates that people must purchase it. This means you must have it lest you be found in violation of the law. In most states, people must purchase a minimum of liability coverage. This coverage pays for bodily injury or property damage you cause to others. The law requires this because they want to ensure that you are held responsible for your damages. In some states, called no fault states, you also must legally purchase personal injury protection (or PIP). If you fail to purchase car insurance, you can be subject to fines, jail time or loss of your vehicle.
Protection from Lawsuits
- People need car insurance as a protection from lawsuits. If you do not have car insurance and you cause an accident, someone can sue you. When someone sues you, you will have to pay all of your own legal fees and any damages awarded by a judge or jury or in a settlement. This can add up to thousands, and sometimes hundreds of thousands or even millions of dollars.
- Personal Protection from Loss
- People need car insurance to protect them from the loss of their vehicle. If you have collision and comprehensive insurance, then you will be reimbursed if someone steals your car or if you cause an accident that damages your own car. This means you are protected from having to face large repair bills or from having to buy a new car, since the insurance company will cover these costs.
Required by Lenders
- Some people need to have car insurance because their lenders require it. If you are leasing a vehicle or if you owe money on a car to a lender, you are usually required to have collision and comprehensive coverage, in addition to the other coverages that the law mandates. You may also be required to have "Gap" insurance, which pays the difference between what you owe on a car and what the insurance company deems the car is worth for reimbursement in the event of a total loss. This protects the lenders or dealer's interests in the event you damage a vehicle that hasn't been paid for.
Beneficial for Society
- People need car insurance because car insurance programs are beneficial for society as a whole. Car insurance acts as a deterrent against bad behavior--people don't want to get tickets or cause accidents because their insurance rates will go up. It also ensures that the burden of paying for accidents doesn't fall to society as a whole. If you didn't have car insurance and you caused injury or property damage, these costs would have to be paid by someone if you didn't have the money to pay them. Usually, this would mean the victim would have to pay, or if the victim didn't have money, society would have to pay in the form of subsidized medical care.
