Car insurance is mandatory primarily because of financial responsibility laws enacted by individual states. These laws require drivers to prove they can cover costs if they cause an accident. The core idea is to protect all parties on the road—you, other drivers, passengers, and pedestrians—from crippling financial losses resulting from crashes, which can involve expensive vehicle repairs and, more importantly, significant medical bills.
The requirement isn't just about your own protection. Liability coverage, the cornerstone of mandatory insurance, is designed for others. If you're at fault in an accident, your liability insurance pays for the other party's vehicle damage and their medical expenses. Without this system, an at-fault driver might be unable to pay for the harm they've caused, leaving the victims with no recourse. This is a matter of public safety and economic stability.
Most states use a "fault" system for handling accident claims, and insurance is the mechanism that makes this system work efficiently. Some "no-fault" states require additional coverage like Personal Injury Protection (PIP), which pays for your own and your passengers' medical expenses regardless of who caused the accident, aiming to reduce litigation.
States enforce this mandate by requiring proof of insurance to register a vehicle and when renewing your license plates. If you're caught driving without insurance, penalties can be severe, including fines, license suspension, and even vehicle impoundment. While it feels like an added expense, it's a crucial part of responsible vehicle ownership that shields you from potentially devastating financial liability.
| State | Minimum Bodily Injury Liability (per person / per accident) | Minimum Property Damage Liability | Minimum PIP (if applicable) |
|---|
| California | $15,000 / $30,000 | $5,000 | Not Required |
| Florida | Not Required* | $10,000 | $10,000 |
| New York | $25,000 / $50,000 | $10,000 | $50,000 |
| Texas | $30,000 / $60,000 | $25,000 | Not Required |
| Pennsylvania | $15,000 / $30,000 | $5,000 | $5,000 |
| Illinois | $25,000 / $50,000 | $20,000 | Not Required |
| Michigan | $50,000 / $100,000 | $10,000 | Varies (Unlimited for Med) |
*Florida is unique in only requiring Property Damage Liability and PIP.
