Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jul 19, 2021

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Insurance Q&A: “Is car insurance worth it?”

You’re darn tooting it’s worth it. Really, it’s worth following all laws. It’s a good way to stay out of trouble with law enforcement…

We get this question quite a bit at TTAI. Frankly, it scares us to hear it as often as we do. The number of uninsured drivers in the country is already staggering and (unfortunately) rising as the economy continues to sputter along. Many folks are choosing to simply drive without insurance as they find it cost prohibitive.

You may remember your parents telling you that driving an automobile is a “privilege,” not a right. As usual, Mom and Dad were right. This means there are a few things you must comply with in order to keep this privilege.

Car Insurance Is a Legal Requirement

That’s right; auto insurance is mandatory in almost every state in the U.S. Aside from the fact that you might get ticketed, towed, lose your license, or have to obtain an SR22 and pay hundreds to thousands of dollars more per year for insurance if you get caught driving without insurance, there are a few pretty basic reasons why car insurance is definitely “worth it.”

This is no joke. More and more states are beginning to use electronic tracking of registered vehicles and crossing this data with insurer information to determine if a particular vehicle has insurance or not.

This means that a cop can follow you, run your tags, and determine whether or not you have insurance on your car…and pull you over on the spot to issue a citation.

In fact, some states are now sending “nasty-grams” in the mail to people who have a registered vehicle and no coverage. Basically, it’s a letter in the mail that says, “We know you don’t have car insurance and we’ll see you on the road!”

Note: You will HAVE to show evidence of car insurance to a dealer or leasing company if you expect to drive a car off a lot whether it’s a loan or lease.

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Benefits of Having Car Insurance Coverage

Other than obeying the law of the land, car insurance can save you some big bucks in the event you are involved in one of the millions of auto accidents that occur on U.S. roadways each year. That’s right; we said millions.

Learn more about how insurance can help you avoid bankruptcy.

There are two basic types of coverage on a car insurance policy. The mandatory portion is known as liability car insurance, which covers you if you injure ANOTHER person or damage their property.

If you cause an accident that results in bodily injury of another person or damage to their property (car), and don’t have liability insurance, expect to be personally sued. This means you will be on the hook for all medical bills and the repair costs of the other party’s vehicle.

The second basic component of car insurance is physical damage coverage, which covers damage to your own vehicle that YOU cause. This piece is optional, but often well worth it, especially if you drive a valuable car.

For example, you would simply have no car or have to cover your own repair bills if you cause an accident that damages your own vehicle.

You may also suffer damage to your vehicle when it’s not moving. Perhaps a hailstorm pelts your car and causes $5,000 in damage. No car insurance? Bust out your checkbook!

Now does it sound more worth it?

Bonus Track

Home insurance is also necessary if you purchase a home with a mortgage loan, which most of us do.

Basically, your mortgage lender requires you to have insurance on “their” property until it’s paid off. After all, they need to protect THEIR financial interest in the home in the event something goes horribly wrong.

But even if you buy your home outright, we’d argue that home insurance is well worth it as well. Without it, the cost of a loss could be financially devastating.

At the end of the day, while insurance of any kind may be a budget drain, or seen as a “scam,” it is definitely worthwhile in the event you suffer a massive loss.

And as previously mentioned, a minimum level of car insurance is a requirement to operate a vehicle on public roadways.

The problem with insurance is that you never really want to “use it,” and if you don’t, you often wonder why you paid for it in the first place. But you’d be hard pressed without it. Figure that one that…

Read more: How to lower your car insurance costs.