Car insurance laws are not something the federal government mandates; instead, each state makes its own. 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 drives; 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 and health insurance are mandatory. 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.
For instance, compulsory third party or CTP insurance, often referred to as a “green slip” in New South Wales, Australia, protects drivers financially from liability. It covers pedestrians, passengers, cyclists, and other drivers injured due to their vehicle’s involvement in an accident.
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 required by states and protects other people from careless drivers. Each state has its own minimum level of liability insurance that car owners must maintain. This ensures 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. 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.
Choosing the right car insurance can feel daunting, but it’s an important decision to save you money and provide peace of mind. Here are some steps to help you select the best car insurance for your needs:
- Assess Your Needs
Decide what types of coverage you need. Most jurisdictions require liability insurance, but you might also want collision, comprehensive, personal injury protection, or uninsured motorist coverage. Determine what deductible amount you can pay out of pocket in case of a claim. Consider your driving habits, the environment where you drive, and the value of your car to better understand your risk exposure.
- Understand Insurance Policies
Research what each type of coverage includes. Liability insurance covers damage you cause to others; collision covers damage to your vehicle from an accident, and comprehensive covers non-collision-related losses like theft or weather damage.
- Get Multiple Quotes
Compare quotes from several insurance companies to find the best rate. Don’t just look at price; consider the coverage terms, customer service reputation, and the ease of filing claims.
- Check Insurer’s Reputation
Look up customer reviews and ratings for the insurance companies you’re considering. Reliable sources include Consumer Reports and your local consumer affairs office.
- Understand Discounts
Insurers often offer discounts for multiple policies, safe driving records, vehicles with safety features, students with good grades, and more. Make sure to ask about any discounts that could apply to you.
- Read the Fine Print
Before finalizing your policy, read it thoroughly to understand the terms, coverage limits, what’s covered, what’s excluded, and your responsibilities as a policyholder.
By taking these steps, you can find a car insurance policy that fits your budget and adequately protects you.