Why car insurance is mandatory: Liability and financial responsibility

Why U.S. states require drivers to carry car insurance: Accidents are expensive and drivers are liable

You need car insurance to drive to meet legal financial responsibility requirements; that is, to ensure you can pay if you hurt someone or damage their property with your car.

Car insurance protects everyone on the road by ensuring that if someone hits you, you'll be compensated, and vice-versa.

Each state sets its own required minimums for coverage.
New Hampshire doesn't require insurance, but still has financial responsibility laws, meaning you must prove your ability to pay for an at-fault accident.
The minimum coverages required by one state or another have no impact on the amount of damages that can be held against you in the event of an accident. You are personally responsible, by law, for paying anything beyond your insurance limits.
There are serious penalties for driving without insurance. You may be cited and fined a substantial amount of money, or you may have your license or registration suspended or revoked.

"You're taking a big risk if you drive without insurance or just the minimums," says Craig Trombly, president and senior licensed public adjusterAn adjuster handles claims for the insurance company. They assess the damage and determine how your coverage applies to damages and injuries. at Claims, Inc. Public Adjusters.

The auto insurance you're required to buy: What's mandatory in your state

State laws vary in terms of what car insurance you have to buy. Here's a breakdown of the common coverage requirements.

Liability coverage

Liability coverage is mandatory in almost every state. Your coverage is represented by three separate numbers for the parts of a liability policy, which are:

Bodily injury coverage per person
Total bodily injury per instance (or for all people in an accident)
Property damage coverage per incident

For example, an 25/50/10 liability policy covers:

$25,000 bodily injury per person
$50,000 total bodily injury for all people
$10,000 property damage per incident

No-fault insurance: PIP and MedPay

In no-fault states, personal injury protectionPersonal injury protection (PIP) pays for your medical, hospital and funeral expenses resulting from a car accident, regardless of who's at fault., and sometimes medical payments coverageAn auto insurance coverage that provides coverage for medical expenses incurred by you and your passengers in the event of an accident, regardless of who is at fault., are required by law. In these states, your insurance company pays for your injuries in an accident regardless of who is at fault.

Uninsured/underinsured motorist coverage

Some states also require uninsured/underinsured motorist coverage. This protects you from those drivers who choose to drive without insurance, or who carry limits that are too low to cover all of the damage and injuries.

The table below outlines which of these coverages are required in each state.

State	State minimum limit	Minimum coverage average rate	Additional required coverage
Alaska	50/100/25	$415
Alabama	25/50/25	$514
Arkansas	25/50/25	$503
Arizona	25/50/15	$662
California	30/60/15	$751
Colorado	25/50/15	$547
Connecticut	25/50/25	$1,039	UIMBI and UMBI
Washington, D.C.	25/50/10	$896	UMBI and UMPD
Delaware	25/50/10	$1,277
Florida*	0/0/10	$1,208	PIP
Georgia	25/50/25	$780
Hawaii	20/40/10	$425	PIP
Iowa	20/40/15	$330
Idaho	25/50/15	$423
Illinois	25/50/20	$462	UMBI
Indiana	25/50/25	$445
Kansas	25/50/25	$520	UMBI and PIP
Kentucky	25/50/25	$708	PIP
Louisiana	15/30/25	$993
Massachusetts	20/40/5	$621	UIMBI, UMBI, PIP and Mandatory BI
Maryland	30/60/15	$815	UMBI, UMPD and PIP
Maine	50/100/25	$377	UMBI and Med
Michigan	50/100/10	$714	PIP and Property Protection
Minnesota	30/60/10	$585	UIMBI, UMBI and PIP
Missouri	25/50/25	$544	UMBI
Mississippi	25/50/25	$510
Montana	25/50/20	$422
North Carolina****	50/100/50	$476	UMBI and UMPD
North Dakota	25/50/25	$354	UIMBI, UMBI and PIP
Nebraska	25/50/25	$369	UIMBI and UMBI
New Hampshire**	25/50/25	$447	UIMBI, UMBI and Med
New Jersey	25/50/25	$1,124	UIMPD, UMBI, UMPD and PIP
New Mexico	25/50/10	$475
Nevada	25/50/20	$908
New York	25/50/10	$1,070	UIMBI, UMBI and PIP
Ohio	25/50/25	$390
Oklahoma	25/50/25	$452
Oregon	25/50/20	$715	UMBI and PIP
Pennsylvania	15/30/5	$421	PIP
Rhode Island	25/50/25	$761
South Carolina	25/50/25	$682	UMBI and UMPD
South Dakota	25/50/25	$382	UIMBI and UMBI
Tennessee	25/50/25	$515
Texas	30/60/25	$620
Utah	30/65/25	$708	PIP
Virginia	50/100/25	$528	UMBI and UMPD
Vermont	25/50/10	$299	UIMBI, UMBI and UMPD
Washington	25/50/10	$490
Wisconsin	25/50/10	$407	UMBI
West Virginia	25/50/25	$577	UIMBI, UIMPD, UMBI and UMPD
Wyoming	25/50/20	$286

There are other types of coverage that are optional, but usually standard in auto insurance policies. Lenders also require them if you finance your vehicle. The most common of these are comprehensive and collision.

Do you have to carry comprehensive and collision coverage?

Comprehensive and collision coverageCollision coverage helps pay for repairs or replacement of your car if it's damaged in an accident, regardless of who is at fault and is subject to a deductible. are only required if your loan or lease mandates them. There are no states that require either coverage.

You should consider carrying collision and comprehensive coverage unless the total loss of your vehicle wouldn’t be a hardship. That is; you can afford to repair or replace your car on your own.

"If you're wealthy enough to go out and pay cash for a $50,000 car, maybe you think you don't need to pay for collision coverage," says Trombly, "but if you slip on ice and total the car when it hits a tree, that's an at-fault accident and you would lose all that money you paid for the car."

Are there any states that don't require car insurance?

The only state that doesn't require car insurance is New Hampshire. All other states mandate some form of coverage.

However, even in New Hampshire, you have to prove that you are financially responsible if you cause an accident. For most people, insurance is the easiest way to do that.

Regardless of state insurance requirements, you’re liable for costs when you’re found to be at fault in an accident.

Why do you need car insurance?

You need car insurance because the costs of a car accident can be shockingly high. Most drivers don’t have enough cash on hand to cover accident damages.

Here's how insurance protects you.

Financial protection from the high cost of an at-fault accident

If you’re in an accident, the damages to yourself and others can be costly, exposing your assets and income if you’re sued for damages or putting your livelihood at risk if you’re injured and can no longer work. If your policy doesn’t cover the damage, you could find yourself facing financial ruin.

Mandatory minimums set by states are generally not enough to cover the costs of a significant accident. With the average price of a new car edging over $50,000 in 2025, state minimum coverage isn't enough if you're at fault for totaling someone's new vehicle.

Damages to your own car when someone else is at fault

Uninsured/underinsured motorist coverage protects you if you’re in an accident caused by someone who either has no insurance or doesn’t have enough coverage. Given the relatively low minimums mandated by states, this is a piece of your policy you shouldn’t overlook.

This is only mandatory in a few states, but there are good reasons for it. Recent statistics from the Insurance Research Council (IRC) show one out of every three drivers is uninsured or underinsured nationwide.

Injuries to you and your passengers: No-fault medical coverage.

Personal injury protection, required in many states, covers medical expenses for you and your passengers following injuries from an accident. This coverage tends to only be offered in what are known as "no-fault" states, wherein the policy is obligated to cover the healthcare expenses of the policyholder regardless of whether or not they were at fault.

Some states also require medical payments coverage, which covers medical bills for you and/or your passengers following an accident.

Protection for lenders

Liability insurance only pays for damages to others, so car loan lenders usually require you to maintain full coverage for a financed vehicle, including comprehensive and collision, so that their secured asset is protected.

Without insurance coverage, lenders are exposed to potential losses if the financed vehicle is totaled or you cannot make your payments. Requiring the borrower to maintain the coverage specified in the loan contract for the vehicle itself, as opposed to just the state's minimums for liability, ensures they won’t incur a total loss.

Sources:

KBB. "New Record: Average new car price surpasses $50,000." Accessed November 2025.
IRC. "IRC Finds 1 in 3 U.S. Drivers are Either Uninsured or Underinsured." Accessed November 2025.

FAQ: Mandatory car insurance

When did car insurance become mandatory?

Car insurance became mandatory over time. Massachusetts was the first state to require car insurance in 1927, but it was not until the 1970s that most states had mandated drivers to carry car insurance. Virginia is the most recent state to mandated car insurance; it became law in 2024.

Why are car insurance requirements different in each state?

Each state creates its own car insurance laws, resulting in varying requirements. Some states have legislated no-fault coverage, while others follow tort laws.

Do you need car insurance to buy a car?

While it’s possible in most places to buy a car without insurance, registering and driving the car are different matters where the car usually does have to be insured.

While states vary in their insurance requirements for registering a car, and most require some minimum level of coverage to lawfully drive it, dealerships and lenders typically require customers to insure the vehicle they have purchased before they drive it off of the lot.

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