Auto insurance is required by law in most states, but why? There are actually a few basic reasons you need to have car insurance beyond the fact that it’s mandatory — but the most important is that car insurance protects you financially.
Why car insurance is necessary
Imagine someone runs a red light and hits you in the intersection, totaling your car, sending you to the emergency room and, after all of the costs have been added up, you are left with $45,000 in car repairs and medical bills.
According to the Federal Reserve, the average American has about $5,300 in savings, checking, and money market accounts, which means the odds are good that neither you or the at fault driver will be able to afford these costs without selling off assets (like a car or house) or digging into a savings or retirement fund. 
You shouldn’t be expected to pay for damage caused by someone else. It also doesn’t feel fair to be forced to sell your house and drain your retirement savings to pay for an accident, whether or not you were the one at fault.
When you buy a car insurance policy, you are protecting yourself from a lengthy court trial and a possible loss of assets, but you aren’t just protecting yourself — you are also taking responsibility for damage you caused to someone else and reducing the number of court cases in an already overloaded justice system.
What is auto insurance and why do you need it?
Car insurance is a general term for multiple types of insurance coverage. A typical car insurance policy is made up of different types of coverage, some you may need and some you may be able to go without.
The various types of car insurance that most people need are listed in the chart below:
Why you need it
Bodily injury liability
The part of your liability coverage that pays for medical bills if you've injured someone else in an at-fault accident.
Property damage liability
The part of your liability coverage that covers property damage you've caused in an accident.
Personal injury protection
Only necessary in some states, this covers medical expenses for you or your passengers after an accident.
Covers the bodily injury costs for you if you're in an accident caused by a driver with little or no car insurance.
Covers damage to your car caused by things other than a collision, like fire and flooding.
Covers damage to your car after an accident, no matter who was at fault.
Almost every state requires drivers to have a minimum amount of bodily injury and property damage liability coverage, though the minimum amount of liability coverage varies from one state to the next.
For example, Florida only requires $5,000 in property damage liability coverage and $10,000 personal injury protection (PIP), while Maine requires drivers to have 50/100/25 levels of coverage in addition to PIP and uninsured motorist requirements.
Is it okay to not insure your car?
No, it is never okay to go without car insurance. Not only is it an important part of protecting yourself financially in the event of an accident, but it is required by law in 48 states. Only New Hampshire and Virginia allow drivers to go without car insurance, and even those states require drivers to prove they can afford to pay for damage out-of-pocket if they are in an accident.
Why do people choose not to have insurance?
Despite the fact that car insurance is a necessity and it's required by law, some people still choose not to buy it. In fact, 12.5% of U.S. drivers went uninsured in 2019.
In most cases, people who choose not to buy car insurance do so because they can’t afford it.
Many people choose to buy uninsured and underinsured motorist coverage to protect themselves in case they’re in an accident with an uninsured driver, while some states include uninsured motorist coverage as part of the minimum level of coverage required for all drivers.