Why is auto insurance required? What happens if you don’t have it?

Why auto insurance is required (and what happens if you don’t have it)

If you’ve ever wondered why auto insurance is required in most states, you aren’t alone. While auto insurance can feel like just another bill to worry about, it provides many benefits to you and to those around you.

Why is auto insurance required?

One of the biggest reasons auto insurance is required to help ensure drivers can pay for damage they cause — whether that damage is to property or an individual. If someone is found at fault for a car accident, the bills that follow can total in the tens or even hundreds of thousands of dollars in repairs, medical bills and more. Most people don’t have that lying around ready to pay.

Auto insurance helps bridge the difference between the actual cost of the accident and the amount the at-fault party can pay. This protects the at-fault party from having to pay a huge amount, but it also makes sure the person who wasn’t at fault is also taken care of and not left to deal with the costs on their own. Basically, auto insurance protects everyone on the road and creates a base “safety net."

What happens if I don’t have auto insurance?

Driving without auto insurance is illegal in almost every state, and there are consequences for not having the required insurance. Here are just a few consequences of driving without insurance:

1. Potential fines: If you are caught, you can face fines of hundreds to thousands of dollars.
2. License suspension: You can also have your license suspended.
3. Higher insurance rates later: If you have a record of driving without auto insurance, once you get coverage, the premium or deductible will likely be noticeably higher.
4. Unable to register your vehicle: You have to show proof of insurance in order to properly register your vehicle each year. Failure to do so can cause you to fail the inspection.
5. Out-of-pocket costs: Without coverage, anything that happens to your vehicle has to be covered directly. You also have to pay out of pocket for any injuries you cause other people by being at fault in an accident. Those costs can add up quickly.
6. Vehicle impoundment: If you have frequent noted citations of driving without insurance, eventually your vehicle can be impounded.
7. SR-22 requirement: In some states, if you are cited multiple times, you may have an SR-22 requirement placed on you by state authorities. This means that you are required to get a sufficient auto insurance policy, and the insurance company is required to notify the state if your policy lapses or is canceled. If they notify the state of this, you can face further consequences.

Auto insurance requirements are taken seriously for a reason. They’re not just about following the law; they’re about protecting you and everyone else on the road. When drivers are properly insured, accidents are easier to recover from, both financially and practically.

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By Lincoln Edgemon, GM Financial

Lincoln learned how to drive in a GMC Sierra and has been a fan of large vehicles ever since. She's committed to clarity in communication that helps others on their journey toward financial literacy.