Auto insurance premiums quickly can come under scrutiny when money is tight. After all, if you can save hundreds per year by cutting car insurance, there is every incentive to let it fall by the wayside. Even so, car insurance is mandatory in every state except Wisconsin and New Hampshire, meaning you cannot legally drop your insurance even if you want to do so. This isn't because the government wants to cheat you--it's because insurance protects you.
Protection Against Ruin
When you do not have insurance, there is no third party who will step in to cover costs in the event of an accident. Subsequently, if you are involved in a crash, you will have to pay to fix the damage yourself. You also can be held responsible for personal injury costs. If you cannot afford to pay these costs out of pocket (most people cannot), then you stand to lose some or even all of the assets you have.
Protection Against Legal Problems
If you don't have insurance and cannot afford to cover damage and injury costs, others involved in the accident have the legal right to sue you for compensation. These lawsuits sometimes resolve quickly, but they potentially can drag on for months or even years. The government thus requires insurance in part because they do not want unnecessary lawsuits to bog down the judicial system, and because they understand that dealing with a lawsuit can be disruptive to your personal life.
Social Responsibility
If you do not have insurance, you force others involved in the accident to make claims against their own policies or pay out of pocket, or to invest money in attorney fees for lawsuits. This places financial hardship on someone else and requires an investment of time and energy. You thus have to have insurance in part because, laws aside, society expects you to take responsibility for your own actions. People do not want to have to foot the bill for something that isn't their fault.
Requirements
Even though you have to have auto insurance, this does not mean you have to have total (comprehensive) insurance. The insurance required by your state is liability insurance, which usually appears in a basic collision policy. This insurance covers you only in the event you get in a crash. It doesn't pay for other damages that might happen, such as a tree falling on your car or someone stealing CDs from your backseat. In other words, the government requires insurance, but they don't force you to buy the fullest, most expensive policies available. It is up to you how much coverage you want beyond basic liability/collision.
Considerations
Even though auto insurance is required in most states, this does not stop people from driving without coverage. An estimated 16.3 percent of drivers don't have car insurance, according to Philip Reed of the Edmunds website; this equates to roughly 50 million Americans. Some of these drivers simply don't agree with the requirement, but others skip insurance because they can't afford the premiums.
If you don't do a lot of driving and are short on cash, one alternative is to purchase driver's insurance instead of regular insurance. Driver's insurance is an extremely basic coverage designed for people who drive very little or who don't own a car. You still get liability protection under driver's insurance, but because the insurance company assumes you'll be driving very little, you're considered a lower risk and premiums are much cheaper.
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