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 15, 2021

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Here's what you need to know...

  • In most states, car insurance is a legal requirement
  • Not having car insurance can lead to many criminal and civil consequences
  • If you are leasing or financing your car, you should be sure you have collision, comprehensive, and gap coverage in addition to the legally required coverage types in your state

No matter if you own, finance, or lease your car, having the proper auto insurance coverage for it is vital. Most banks require you to have full coverage insurance on your car regardless of what the legal limits are in your state, to make sure that the car is protected. You may even have your car repossessed for failing to maintain proper insurance.

For some drivers, auto insurance can consume a larger portion of their paycheck than they would like to hand over or can even afford to pay.

If you are one of these drivers, consider using an online price comparison tool to ensure you are receiving the best auto insurance rates possible.

Compare now by entering you zip code!

Car Insurance: Legal Requirements

Almost every state in the nation requires its drivers to carry a minimum of liability insurance on their vehicle. This is true for drivers whether they are driving a vehicle they own or one that they are financing or leasing.

Minimum insurance requirements help keep all drivers, passengers, and even bicyclist and pedestrians safe from financial ruin.

Perhaps you decided you just couldn’t afford a car insurance policy or mistakenly let your policy lapse, either way, not having at least the legally required amounts of auto insurance in your state can have severe consequences.

If you are in an auto accident or pulled over for a routine traffic stop you could face some or all of the following legal consequences for not having auto insurance:

  • Suspension of your driver’s license
  • Suspension of your vehicle registration
  • Fines
  • Community service
  • Jail time
  • Required SR22 insurance

In addition to the criminal legal consequences for not having the proper auto insurance coverage, you also put yourself at risk for civil legal consequences.

This means if you cause damage to another person’s property or cause them bodily harm, they can sue you in civil court for these damages. This could lead to the seizure of your assets or wage garnishment.

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Types of Auto Insurance Coverage

Your auto insurance policy is several different coverage types all rolled into one larger policy. Your insurance needs will vary based upon the status of your ownership of the vehicle, your financial needs, and the state where you live.

Here is what you need to know about each type of auto insurance coverage and which ones are necessary for a car that you do not own:


Liability is the most basic form of auto insurance coverage. It is also the minimum type that is mandated in nearly every state. Liability insurance coverage will pay for damages that you cause to other people or their property.

Unless you have the financial means to pay for thousands of dollars in damages out of your own pocket, you should have liability insurance.

Medical Payments

This coverage is also known as personal injury protection, PIP, or med pay. This coverage is optional in some states. Med pay covers expenses for injuries that you or your own passengers suffer in an accident, no matter who was found to be at fault for the accident.

It can also be used as reimbursement for lost wages or for hired help at home for childcare or housekeeping services if these services are needed due to injuries from the accident.

Uninsured/Underinsured Motorist Coverage

Also legally required in some states, uninsured motorist coverage can help you if you are in an accident with an uninsured driver or are a victim of a hit-and-run accident.

Underinsured motorist coverage can help pick up the tab for your accident-related expenses where the other driver’s insurance coverage leaves off.

For instance, if you were in an accident caused by another driver that caused $10,000 worth of damages to your vehicle and the other driver’s policy limits only paid $5,000 for the damage to your car, your own underinsured motorist coverage would pay the other $5,000.

Collision Coverage

If you do not own your own vehicle but rather have leased or financed it, you are likely contractually required to have collision coverage. Collision covers damages to your vehicle if you collide with another vehicle, building, or other structure like a light pole.

Comprehensive Coverage

In addition to collision coverage, you are usually also required to have comprehensive coverage on a financed or leased car. Comprehensive covers a variety of situations such as theft, vandalism, hitting wildlife, floods, fires, and other natural disasters.

Gap Coverage

If you are leasing your car, you most likely have gap coverage rolled into your lease payments. If you do not, you may be required to purchased your own gap insurance. This type of coverage is important because vehicles depreciate so quickly.

Within just a few months of financing or leasing a vehicle, you could owe more than your vehicle is worth. In this case, you could potentially owe money to your leasing or finance company if your car was totaled in an accident.

This is because your car insurance company will only pay what they consider to be the fair market value of the vehicle at the time of the accident.

Gap insurance will cover any differences between the amount you still owe on the vehicle and the amount your insurance company is willing to pay for it.

The more coverage you have on your financed vehicle, the better protected you will be. Using an online price comparison calculator will allow you to compare several different auto insurance companies and their prices all in one place.

You can then make the best coverage decision for vehicle and your wallet. Start comparing car insurance quotes now!