A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 18, 2021

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Important facts to know...

  • Some people think paying insurance premiums is a waste of money
  • The real risk, though, is in not carrying insurance
  • Protect yourself from financial hardship by carrying adequate insurance
  • You can shop around and compare policies to find the best deal on coverage

Have you ever heard anyone say, “Insurance is just a waste of money?” Everyone feels that way perhaps at some point, especially that once a month or time when their insurance premiums come due. It can be hard to see the benefit of insurance when we don’t need to file a claim.

But the truth is that it is much more expensive to go without insurance than to purchase it.

Every state requires that drivers have insurance coverage except for two states: Virginia and New Hampshire. Even in these two states, there are certain requirements that the law has such as proving that you would be able to pay for the costs of an auto accident if you were at fault.

Additionally, even in states that do not require insurance, they still encourage that individuals purchase insurance. Why? Because the costs of legal fees, lawsuits, damages and injuries, and other issues are just too costly to risk.

If you don’t want to risk not having auto insurance, start comparison shopping today for the best auto insurance rates! Enter your ZIP code above!

The Purpose of Insurance

Remember that the reason insurance was invented in the first place was to keep the number of tort law cases down (civil actions that involve alleged negligence on the part of at least one party).

In addition to the problems with legal actions, if you lose the case, you may be required to pay the entire amount of all damages awarded by a judge in such a case, creating extreme financial distress for you or your family.

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Legal Fees

The legal fees alone for failure to carry insurance can add up to thousands of dollars. The amount imposed by a judge for failure to provide proof of insurance depends on the state of residence.

In addition to monetary fees imposed by the court, you could also lose your driving privileges, depending on the circumstances. If you were driving under the influence or there are other issues involved, you may be cited for additional penalties.

Some of these could even involve jail time.

Reasons to Have Car Insurance

There are some reasons that you should have car insurance at all times. Some of the most important ones are stated below.

It’s the Law

The main reason you should always carry current car insurance is that it is the law. If you break the law, as stated above, you will have to pay stiff penalties and may lose the very privileges for transportation that you take for granted.

Not having a car can create a snowball effect when you have trouble getting to work, or you are unable to perform the necessary duties that you need to do to carry on with your daily errands or other important tasks.

It Protects Your Financial Status

Another reason you should carry insurance is that it protects you from financial ruin.

If you have an accident in a “fault state” such as Arkansas, you will be required to pay for all damages and injuries that others sustained (including all of the passengers in your car as well as the other cars involved), in addition to the physical damage done to the vehicles.

Remember that insurance is for the purpose of paying for the damage and injuries that occur due to your negligence.

It Keeps Insurance Costs Down

Think of car accident statistics as the planning phase for insurance premiums. Car insurance companies use insurance statistics as a way to monitor the amount of financial loss, loss of life, and property damage. They then use this information to decide on how much premium should be charged.

Insurance has always worked by having the people who don’t need it to pay for those who do. Then, when you need it, it is there for you also.

If most people are insured, insurance costs stay down because the out-of-network expense and lawsuits that occur with individuals who were not insured are low.

When more people drop their policies, the ones who are insured are forced to factor in the accidents of other uninsured drivers, driving the cost of insurance up.

Sounds complicated? Really, it’s not.

Insurance is there to cover risk and to pay out claims when accidents to occur. If people are not insured, the cost of insurance must go up to cover the huge financial expense that occurs for the uninsured.

What is a fault state?

A fault state is a state that requires a ruling of fault before an insurance company is required to pay. If you are involved in an accident, and the police officer on the scene gives you a citation, you will be responsible for the damages.

No matter what your financial status, it could only get worse if you are involved in an accident without insurance.

You may be required to pay liability for deaths or injuries, medical conditions that are a result of your negligence, and a myriad of unexpected court and legal fees that could add up quickly to a financial disaster.

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What is a no-fault state?

In a no-fault state, you have a legal situation that is similar in court to “no contender” (meaning “no contest”).

A “no contender” is actually a plea that is entered when you have to go to court for such an accident in which you are stating that you are not contesting the ruling, nor do you claim fault for it.

In such cases, the court typically rules that each person involved pays for their own damages, no matter who is at fault. Some of the “no-fault” states include:

  • Florida
  • Michigan
  • New Jersey
  • North Dakota
  • Utah

There are currently 12 no-fault states in the U.S.

The Greatest Risk

When you factor in all of these statistics, facts, and figures, you realize that the greatest risk is not carrying insurance.

No matter what, you will pay if you are in a “fault” state. You may also pay in a “no fault” state if the injured party sues you and you do not have insurance.

In this case, you would need to have PIP (personal injury protection) to keep from having to pay for such damages out of your pocket.

As you can see, the cost of premiums may seem like a lot, but it’s nothing when compared to the short-term and long-term cost of failure to carry insurance if you are involved in an accident.

Many people think it is worth the risk. So they drive without insurance, hoping they will not have an accident or get pulled over. But it’s a gamble that is risky.

If you don’t want to risk it, shop and compare insurance companies today and decide which one is right for you.

You can compare similar policies between multiple companies using an online quote tool, and then you’ll be able to see what policies and coverages work best for your budget.

The biggest waste of money is in having to pay out-of-pocket for something an insurance company should have paid for you.

If you want to save money by getting auto insurance, compare at least three to four policies and find the best fit for you! Enter your ZIP code below!