Why Do You Have to Have Car Insurance?

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By Jacob Maslow

Car insurance laws are not something the federal government mandates; instead, each state makes its own car insurance laws. Currently in the United States, at least a minimum level of car insurance is required by law in every state except New Hampshire. In most states, the insurance requirement applies even to cars the owner no longer drive; the car must be insured, even if it doesn’t work and stays parked in the owner’s driveway.

When cars were invented more than a century ago, it quickly became apparent that car accidents would happen, and those at fault would often be unable to pay for the damages. In trying to prevent this financial situation from occurring, the idea of car insurance was devised. Connecticut and Massachusetts became the first two states to make purchasing a minimum amount of car insurance a legal requirement, which they did in 1925. Other states gradually followed suit.

Car insurance is required to protect other people and their property, which a driver may accidentally damage. This “other person” distinction is why car insurance is mandatory, and health insurance is not. With health insurance, a person is only paying to protect themselves and their families. With car insurance, the car owner pays to protect other people.

There is also an important distinction between collision and liability protection with car insurance. If a car is financed, the financing company will almost always require the purchaser to maintain collision insurance until the car is paid off. Once a car is paid off, collision becomes optional. Collision protects the car from theft, fire, vandalism, etc. It protects the financing company’s financial interests, and the car owner.

Liability insurance is what states require, and it is what protects other people from careless drivers. Each state has its own minimum level of liability insurance it requires car owners to maintain. This insures the financial interests of injured parties are protected.

As to why New Hampshire is alone among states in not requiring liability car insurance to be maintained, the reason can be found in the state’s motto: “Live Free or Die.” New Hampshire prefers to not interfere in the lives of its citizens whenever possible. That is why it is also the only state with no adult seat belt law. However, even there, it is still in one’s best financial interests to buy car insurance.


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