Why do you need automobile insurance?
The simple reason is that in most states it is illegal to drive without having your car insured for certain coverages. Penalties can be severe. There can be fines, you can lose your driver’s license and your car may even be impounded. But besides it being the law, it’s a good idea.
There are five fundamental automobile insurance coverages. They are:
1. Bodily Injury and Property Damage Liability coverage,
2. Personal Injury Protection coverage (sometimes called “No-Fault”),
3. Uninsured and Underinsured Motorists coverage,
4. Collision coverage,
5. Comprehensive coverage (sometimes called “Other Than Collision”).
The first three coverages; 1. bodily injury and property damage liability coverage, 2. personal injury protection coverage, and 3. uninsured and underinsured motorists coverage, are required by law in most states.
The other two coverages; 4. collision coverage and 5. comprehensive coverage, are not required by law, but are usually required to be purchased under the terms of most finance contracts. That is, when you buy a new or used car and are financing the purchase through a bank or some other financial entity, they usually require you to purchase these coverages as a condition of the loan. Similarly, when you are leasing a car, the leasing company will often require comprehensive and collision coverage.
Automobile insurance may be required, but even if it
weren’t, it is still a good idea to have auto insurance. Here are some examples why.
