Is Car Insurance Mandatory? What Every Driver Needs To Know

In every state in the U.S. except New Hampshire, it is illegal to drive without car insurance. Most states have laws requiring drivers to carry at least a minimum amount of liability coverage. Liability coverage helps pay for injuries or property damage you may cause to others in an accident. It is required to ensure that costs for medical bills and damages resulting from an accident will be covered.

The amount of car insurance you are required to carry varies by state. If you live in a no-fault state like Florida or Michigan, you may be required to have more than just liability insurance. If you lease or finance your vehicle, your lender may also require you to carry comprehensive or collision coverage, plus GAP insurance may be required as well, but these aren't legally enforced by the state; this agreement would be between you and your lender.

Let's look closer at the question "Is it mandatory to have car insurance?" and see how that applies to you.

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Key takeaways

Most states require drivers to carry at least liability insurance.
New Hampshire is the only state that doesn't mandate car insurance, but it still requires drivers to show proof they have the financial resources to cover damages or injuries.
Driving without car insurance is illegal and can result in fines, license suspension, and even jail time.

Why do you need car insurance?

Having car insurance is essential because it provides you with financial protection if you are ever involved in an accident. Car repairs, medical expenses, and paying for property damage caused in an accident can be incredibly costly. Insurance helps cover those expenses, so you're not stuck paying out of pocket. Liability insurance is especially important because it pays for damages and medical expenses for others involved in an accident that you cause. This ensures that they are compensated for their losses, and you are protected from being sued for the damages.

Some states, particularly those that are no-fault states, will also require drivers to carry Personal Injury Protection (PIP) on their car insurance policy. This covers medical expenses, lost wages, and other related costs for you and your passengers, regardless of who is at fault in the accident.

Liability insurance covers damage to another driver's vehicle in an accident, but you will need comprehensive and collision insurance to cover repairs for your own vehicle. These are optional coverages that aren't required by law. However, if you lease or finance your vehicle, your lender may require you to carry one or both coverages.

If you don't have at least the minimum auto insurance coverage required by your state, then you won't be able to register your vehicle. There are only six states that don't require proof of insurance to register a car: Mississippi, New Hampshire, North Dakota, Tennessee, Washington, and Wisconsin.

49 of 50 states require car insurance

New Hampshire is the only U.S. state that doesn't require drivers to carry car insurance. However, you will still need to provide proof that you have sufficient funds ($25,000) to pay for damages if you are involved in an accident that you caused. While there are a couple of different ways to provide proof, the easiest way is to carry auto insurance. This proof can also be in the form of a surety bond or by depositing money or securities with the state treasurer.

If you choose to get car insurance in New Hampshire, the minimum liability insurance requirements you must meet include:

$25,000 per person for bodily injury
$50,000 per accident for bodily injury
$25,000 for property damage

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Minimum liability coverage

How much auto insurance you are required to carry varies by state, but those requirements usually include bodily injury liability per person, bodily injury liability per accident, and property damage liability. The standard coverage requirements in many states are:

$25,000 bodily injury liability per person,
$50,000 bodily injury liability per accident, and
$25,000 property damage liability per accident.

Some states require considerably less coverage, while other states require more. You can find out the specific auto insurance requirements in your state through the state Department of Motor Vehicles or Department of Insurance.

While the minimums are designed to ensure some protection, the required limits often don't provide enough protection if you are involved in a serious accident. Insurers usually recommend you purchase more than the minimum required coverage.

Additional required coverage

Many other states require more coverage above and beyond just bodily injury and property damage liability. Different auto insurance options that may be needed in your state include:

Personal Injury Protection (PIP) - This insurance helps cover medical expenses and related costs after an accident, regardless of who was at fault in the accident. It is often required in no-fault states such as Florida, Massachusetts, and Minnesota.
Uninsured/Underinsured Motorist Coverage (UM/UIM) - This insurance covers the cost of injuries or damages from an accident with a driver with little to no insurance. It is required in about half of all states, many of which have a higher number of uninsured motorists, including Connecticut, Illinois, and Wisconsin.
Medical Payments - This coverage helps pay for medical expenses after an accident, regardless of who is at fault. It typically covers costs like ambulance fees, hospital visits, surgery, X-rays, and even funeral expenses for you and your passengers. It is only required coverage in Maine.

If you are still making payments on your car or lease, you may be required to carry additional insurance by your lender. These coverages can include:

Collision insurance - This covers damage to your vehicle if you are involved in an accident or collision with another vehicle or fixed structure (like a tree or light pole).
Comprehensive insurance - This coverage helps pay for damages to your car from incidents outside of accidents with another vehicle. It can include weather-related damage, fires, vandalism, theft, or accidents with animals (like if you hit a deer).
GAP insurance - Guaranteed Asset Protection (GAP) is a type of car insurance that helps cover the difference between what you owe on your auto loan or lease, and the vehicle's actual cash value if it is totaled or stolen.

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Penalties for driving without car insurance

Driving without car insurance can lead to legal trouble and costly financial repercussions. Just like insurance requirements vary by state, so do the penalties for driving without insurance. In most states, it's against the law to drive without insurance, and you can face fines, license suspension, and even vehicle impoundment. The penalties typically increase with each offense and could even lead to jail time if you are involved in an accident without insurance.

You may also have trouble registering your vehicle without insurance. Many states require that you show proof of insurance to register your car. And, if you try to get insurance after a lapse in coverage, you can expect your car insurance premium to be higher.

The risks of driving without car insurance go beyond legal penalties. If you are found at fault in an accident, without insurance, you would be personally responsible for covering the costs of medical bills, vehicle repairs, and property damage.

FAQs

Why are we forced to have car insurance?

Car insurance is mandated to protect both you and the other drivers you may be involved in an accident with. It helps cover the cost of injuries or property damage to other drivers in an accident you cause,and keeps you from having to pay thousands of dollars out of pocket.

Is it illegal to have no car insurance in the U.S.?

Yes, in most U.S. states, it is illegal to have no car insurance coverage. Most states legally require drivers to carry at least a minimum amount of liability insurance. New Hampshire is the only state that doesn't require coverage, but you still have to prove that you can afford to cover damages in an accident you cause. The easiest way to show this proof is with insurance.

Can I cancel my car insurance?

Yes, you usually can cancel car insurance at any time. However, if you are still driving, you should ensure that you have coverage from a different insurer before you cancel your current coverage.

Can I decline car insurance?

No, you can't decline car insurance because it is a mandatory requirement for drivers in all but one state. Driving without car insurance is illegal and can lead to fines, suspension of your driver's license and vehicle registration, and even jail time.

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Bottom line

In all states except for New Hampshire, car insurance isn't optional. It's the law. Driving without it can lead to fines, license suspension, vehicle impoundment, and even jail time. Even in New Hampshire, where car insurance isn't legally required, you must still prove you can cover the cost of damages if you cause an accident.

To stay protected and avoid severe penalties, make sure you understand your state's insurance requirements. This can help you choose a policy that fits both your legal obligations and your financial means. If you are unsure where to start, contact a licensed insurance agent or your state's Department of Motor Vehicles for guidance.

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