If you think you need auto insurance to make you whole by repairing your car when it got hit or to give you a rental car when the car was damaged in an accident, you would be wrong. Car insurance was created to ensure that people would not be driving around in beat up vehicles, that put them at risk of losing their homes, their retirement funds or destroying their way of life.
Sounds crazy? Think of this, what if you don’t have insurance or don’t have enough insurance and you hit someone with your car and you are definitely in the wrong. Let’s say you live in a $250,000 home with $60,000 in equity, and the damage you caused to the person you hit was $62,000. Where do you think the lawyer that person hires is going to get the money for the damage you caused? In that scenario, it may take a few years, but ultimately without auto insurance you will have to pay out of your pocket or out of your home equity for the damage.
Many people think they need auto insurance because it’s mandated by the state they live in, or because the lien holder on their vehicle requires it. The truth is auto insurance covers more than just your car, it protects you, your family, your home and your way of life.
Many people think if I don’t have anything, what do I need to have insurance for, and they are right. If you don’t have anything to lose then you shouldn’t have much to protect. But unless you’ve stopped living, you still have a car, and you may have some savings. What if your car is totaled in the accident, how do you get to work, how do you get around freely? And as far as your savings, do you want what little you have going to someone else?
My point is, we all have something, or we will have something to protect in our lives, and car insurance is there to help us protect it. The question should never be, do I need my auto insurance, it should always come to how much do I need.
In our next post we will provide tips on how much auto insurance you should have.