You need car insurance from the moment you legally own and operate a car on public roads. In the United States, nearly every state has a financial responsibility law that mandates a minimum level of car insurance coverage to drive legally. The only exception is New Hampshire, which has alternative financial responsibility requirements, and Virginia, where you can pay an uninsured motor vehicle fee. Beyond legality, you need insurance whenever you are financially responsible for a vehicle, including when financing a car (where the lienholder requires it) or test-driving a vehicle you intend to purchase.
Operating a vehicle without insurance can lead to severe penalties, including fines, license suspension, and even vehicle impoundment. The minimum coverage required is typically expressed as three numbers, for example, 25/50/25. This stands for $25,000 in bodily injury liability per person, $50,000 per accident, and $25,000 in property damage liability per accident. However, these state minimums are often insufficient to cover the full cost of a serious accident.
| State | Minimum Bodily Injury Liability (Per Person/Per Accident) | Minimum Property Damage Liability | Uninsured Motorist Bodily Injury Required? |
|---|
| California | $15,000 / $30,000 | $5,000 | No |
| Texas | $30,000 / $60,000 | $25,000 | Yes (Must reject in writing) |
| New York | $25,000 / $50,000 | $10,000 | Yes |
| Florida | $0* / $0* | $10,000 | No |
| Illinois | $25,000 / $50,000 | $20,000 | Yes |
*Florida requires PIP (Personal Injury Protection) but no bodily injury liability at the minimum level.
Beyond the basic legal mandate, you need insurance for financial protection. If you cause an accident, liability coverage pays for the other party's medical bills and vehicle repairs, shielding your personal assets from lawsuits. Comprehensive and collision coverage protect your own vehicle from damage due to theft, vandalism, or a crash. Most lenders require these coverages if you have a car loan or lease.
