Car Insurance: Do You Actually Need It? (Yes, and Here's Why)

Let’s get the short answer out of the way: yes, you need car insurance. It’s required by law in 49 out of 50 states (looking at you, New Hampshire — though even there, you’re financially responsible for damages).

But beyond the legal requirement, insurance is what stands between you and financial ruin if something goes wrong on the road. A single accident without insurance can cost you tens of thousands of dollars, your license, and even your future wages through garnishments.

So yeah, you need it. Now let’s talk about what you actually need to know.

The Types of Coverage

Car insurance isn’t one thing — it’s a bundle of different coverages. Here’s what each one does.

Liability Coverage (Required)

This pays for damage you cause to other people and their property.

• Bodily Injury Liability: Covers medical costs, lost wages, and legal fees for people you injure. Typical minimum: $25,000 per person / $50,000 per accident.
• Property Damage Liability: Covers damage you cause to other people’s property (their car, a fence, a mailbox). Typical minimum: $25,000.

You’ll see this written as three numbers, like 25/50/25. Most experts recommend at least 50/100/50 or higher. The state minimums are dangerously low — a serious accident can easily exceed them, and you pay the difference.

Collision Coverage (Optional but Recommended)

Pays to repair or replace your car if you hit something (another car, a tree, a guardrail) regardless of who’s at fault. Your deductible ($250-1,000) comes out first.

Worth it if: Your car is worth more than $5,000-10,000. If your car is worth $3,000 and you’re paying $500/year for collision with a $1,000 deductible, the math doesn’t work.

Comprehensive Coverage (Optional but Recommended)

Covers damage from things that aren’t collisions: theft, vandalism, fire, hail, flooding, hitting a deer, falling objects. Same deductible structure as collision.

Worth it if: Same math as collision. Also required if you’re financing or leasing the car.

Uninsured/Underinsured Motorist Coverage

Protects you if you’re hit by someone who doesn’t have insurance (or doesn’t have enough). About 13% of drivers are uninsured, so this isn’t a rare scenario.

Our recommendation: Get this. It’s usually cheap ($50-100/year) and covers a very real risk.

Medical Payments / Personal Injury Protection (PIP)

Covers medical expenses for you and your passengers, regardless of fault. Some states require PIP. It’s useful if you don’t have great health insurance.

What Affects Your Rates

Insurance companies use a lot of factors to calculate your premium. Here are the big ones:

Age and Experience

Young drivers (under 25) pay significantly more. A 19-year-old pays an average of $3,000-5,000/year for full coverage, compared to about $1,500-2,000 for a 30-year-old. Why? Statistically, younger drivers have more accidents.

Driving Record

Tickets and accidents increase your rates — sometimes dramatically. A single at-fault accident can raise your premium by 25-40%. A DUI can double it or more.

Credit Score

In most states, insurers use your credit-based insurance score to set rates. Better credit = lower premiums. It’s controversial, but it’s legal in most states.

Vehicle

The car you drive matters. Sports cars, luxury vehicles, and cars that are expensive to repair cost more to insure. A Honda Civic costs significantly less to insure than a BMW 3 Series.

Location

Urban areas have more accidents, theft, and vandalism, so premiums are higher. Your specific zip code matters.

Coverage Levels and Deductible

Higher coverage = higher premium. Higher deductible = lower premium. Raising your deductible from $500 to $1,000 can save you 15-25% on collision and comprehensive premiums.

How Young Drivers Can Save Money

Insurance for young drivers is expensive, but there are real ways to reduce it:

1. Stay on Your Parents’ Policy

If possible, being added to a parent’s policy is almost always cheaper than getting your own. You benefit from their driving history, multi-car discount, and established relationship with the insurer.

2. Good Student Discount

Most insurers offer 5-15% off for students with a B average (3.0 GPA) or higher. You’ll need to provide a transcript or report card.

3. Defensive Driving Course

Completing an approved defensive driving course can save you 5-10% in many states. Some are available online for $25-50.

4. Drive a Boring Car

From an insurance perspective, a used Honda Civic or Toyota Corolla is ideal. Reliable, cheap to repair, and not a theft magnet. That Dodge Charger might look cool, but your insurance bill won’t.

5. Usage-Based Programs

Many insurers offer programs (Snapshot by Progressive, Drive Safe & Save by State Farm) that track your driving habits. If you drive safely — no hard braking, no speeding, not too many miles — you can save 10-30%.

6. Bundle Policies

If your family has homeowners or renters insurance, bundling with the same company can save 5-15% on each policy.

7. Shop Around

This is the biggest one. Get quotes from at least 3-5 insurers every year. Rates vary wildly between companies for the same driver and vehicle. A difference of $500-1,000/year between insurers is common.

8. Pay in Full

If you can afford to pay your premium annually instead of monthly, most insurers give you a discount (or at least don’t charge the monthly installment fee, which can add $5-10/month).

Common Mistakes to Avoid

• Only carrying state minimums. The minimum is almost never enough. A single hospital visit can exceed $25,000 in bodily injury coverage instantly.
• Dropping collision/comprehensive too early. If you still owe money on the car, your lender requires these. Even if you don’t, keep them until the car’s value drops below $5,000 or so.
• Not reporting changes. Moved? Got married? Changed jobs? Changes in commute distance and address affect rates — sometimes in your favor.
• Ignoring discounts. Many people qualify for discounts they never ask about. Ask your agent what’s available.

What to Do After an Accident

1. Make sure everyone is safe. Call 911 if anyone is injured.
2. Exchange insurance info and contact info with the other driver.
3. Take photos of the damage, the scene, and the other car’s license plate.
4. File a police report (required in many states for accidents with injuries or significant damage).
5. Contact your insurance company to report the claim.
6. Don’t admit fault at the scene — let the insurance companies sort that out.

The Bottom Line

Car insurance is non-negotiable — legally and financially. Understand what each coverage type does, carry more than the state minimum, and shop around every year to make sure you’re getting a fair rate.

Young drivers will pay more, but smart choices — good grades, a sensible car, defensive driving courses, and staying on a parent’s policy — can make a meaningful dent in those premiums.

MyFirstCar helps you keep your insurance documents organized and reminds you when it’s time to shop for a better rate. Because adulting is easier with a little help. Download MyFirstCar →