You’re familiar with the routine: one more month, one more payment for car insurance. As you apply the stamp to the envelope, you get the idea, “What would happen if I let my auto insurance coverage lapse and got into an accident?”
One in seven drivers in the nation has to ask themselves this question. 13.8 percent of drivers nationwide lack insurance, according to a 2011 Insurance Research Council report.
Let’s first discuss what it means not to have insurance. Six categories of coverage, which are applicable in various situations, are frequently found in auto insurance policies:
- The damages you inflict on other motorists and passengers as a result of an accident are covered by your bodily injury liability coverage.
Repairs to other people’s cars, houses, fences, and other property that you damage in an accident are covered by property damage responsibility.
- Regardless of whether you were at fault for the collision, collision pays for damages to your car.
- The cost of injuries to both the driver and passengers in your automobile is covered by personal injury protection.
- Comprehensive insurance covers damage to your car caused by mishaps outside collisions, like vandalism or natural disasters.
- If you are hit by a hit-and-run driver, a driver without insurance, or a driver with insufficient insurance to meet the costs of an accident, uninsured and underinsured motorist coverage will pay for your injuries and any damage to your car.
The first two categories of insurance are typically discussed when we refer to a “uninsured driver.” Except for New Hampshire, every state required drivers to have a specified amount of liability insurance as of February 2012 [source: Insurance Information Institute] to cover injuries and property damage in accidents they’ve caused. (Drivers without insurance in New Hampshire are required to pay for accidents they cause according to financial responsibility regulations.) Before you can legally drive, many states demand that you have additional types of insurance.
What will occur if you don’t have the proper insurance coverage? Find out by reading on.
The repercussions of driving without insurance change from state to state. Most states mandate that drivers always have evidence of insurance on them. Even if you don’t get into an accident, driving without auto insurance can get you fined up to $5,000, have your license suspended, or even land you in jail [source: Insurance Information Institute]. The good news is that you will probably be protected in the case of an accident if you are using someone else’s automobile with their consent and that person has insurance.
Let’s assume, though, that you were entirely uninsured and driving alone when you were in an accident. You may still receive compensation from the at-fault driver’s insurance provider even if you weren’t the cause of the collision (i.e., you weren’t “at-fault”). On the other hand, if you were struck by an uninsured driver, you would probably need to file a lawsuit against them to recover damages. However, rules that restrict uninsured drivers’ legal options or outright prevent them from suing for noneconomic damages like pain and suffering have been proposed or put into effect in at least 20 states. Insurance Information Institute, a source.
Depending on the state you live in, if you are found to be at fault for the accident, the passengers in the car you hit may be entitled to compensation by having one or more of your assets taken into consideration. These assets may consist of your savings, a piece of the money you will make from each of your upcoming paychecks, or even your house. Additionally, it will be difficult for you to purchase auto insurance in the future without joining an assigned risk pool. This group of drivers is made up of people whose serious offenses have made it impossible for them to purchase insurance on their own, so the state connects them with insurance agents who charge them exorbitant premiums.
According to Michael Barry of the Insurance Information Institute, “most individuals understand that the potential liabilities of a serious motor accident are something you can’t necessarily save for.” [source: Barry] Therefore, even while giving up your auto insurance might seem like an easy method to save money, it will eventually cost you.