Why Insurance? Frequently Asked Questions

We get many questions from our readers asking "why insurance?"; why should they bother with buying automobile insurance if it mainly benefits others. Please know that most states have compulsory insurance laws, meaning that you are legally required to have an insurance policy on your vehicle with at least liability coverages, so this issue should be moot, but there are actually so many additional reasons why personal automobile insurance policies are so valuable. Here are some of the more common questions and comments, as well as our responses explaining why insurance is so important.

Why do I need to buy insurance? If you live in a state or region that has laws requiring vehicle owners to carry automobile insurance on those vehicles, there will be penalties for not adhering to that law. They may range from traffic citations and fines to having your vehicle registration cancelled to having your driver’s license revoked. If there is a lien holder (the entity that you owe your loan payments to) on your vehicle, that lien holder will require you to insure it.

I’m a good driver. I don’t need insurance. You may be the safest driver in the world. That makes you the only driver who is. What about everyone else who shares the road with you? What if they hit you? Of course, it would be the other driver’s fault, but what if they do not have an automobile insurance policy that you can make a claim against? Who will take care of your property damage or your personal injury claim? This is why insurance is a valuable investment; if you have your own automobile insurance policy, you should be taken care of.

My car (truck, any automobile) isn’t worth anything. Why should I buy an insurance policy on it? Insurance policies are more than just first party coverages to compensate you for damages to or the loss of your own vehicle. They can compensate you for medical expenses or lost wages if you are injured. You can buy inexpensive policy “extras” such as rental car or towing reimbursement. An insurance policy with good liability limits may help protect you against claims made against you by others who may be injured as a result of your mistake or negligence.

Why do I need to buy an insurance policy with liability coverages just to pay claims made by other people? Because if you do not have a liability insurance policy to cover claims that you are responsible for, you will be paying those claims out of your own pocket or as garnishments against any of your future wages. The lack of an insurance policy does not excuse you from your obligations. An insurance policy is protection for you.

I have health insurance, so why do I need Med Pay or PIP? Both Med Pay (Medical Payments coverage) and PIP (Personal Injury Protection) are no-fault coverages which are very inexpensive. While your own health insurance may have a deductible and co-payments, neither Med Pay nor PIP coverages do. These coverages will also pay lost wages or income, which most health insurance will not. Many states even require that this coverage be included on an automobile insurance policy because it is so valuable.

Commonly, our readers just state “I can’t afford insurance”. Our response is: you can’t afford not to have it. Shop around and be willing to take on low limits and high deductibles if that is what you need to do in order to be able to afford to pay your insurance premium. Some states even have public insurance programs such as Maryland’s MAIF. Consider the idea that you may be involved in an automobile accident for which you are at fault some day. A lack of insurance will not absolve you of your financial responsibility to the other party for their damages or personal injury. The other person may make a claim with their insurance company who will then pursue you personally for compensation, or the person might pursue you personally himself. You may face losing assets to pay any damages, or even have future wages garnished. This could have a far larger impact on you than scraping together an insurance premium.

If you don’t see your question about why insurance is so important addressed here, please feel free to contact us.

This article written for informational purposes and is not intended to take the place of competent local legal counsel.

Other articles related to this topic:

Choosing an Insurance Company that is Right for You

An Explanation of the Insurance Claims Handling Process

Ten Ways to Save on Your Automobile Insurance

What Is An Insurance Lienholder?

An Explanation of Insurance Company Preferred Repair Shop Programs

GAP Coverage Explained

An Explanation of the Difference Between First Party and Third Party Claims

Umbrella Policies (PUPs) Explained

Steps to Take if You Are Sued as the Result of an Accident

Uninsured/Underinsured Motorist Coverages Explained

We welcome your comments and reviews.

Do you have information or an opinion to share about your insurance company? Please share it. Let our readers know what you do or do not like about your automobile insurance carrier. It may be a comment about a specific policy coverage or the way your claim was handled. We appreciate your input.

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