Auto insurance policies protect you from economic loss or damage when you are involved in an automobile accident. For example, an insurance policy can pay for the cost to repair or replace a damaged automobile, for the cost of medical treatment for an injury or illness or for the lost income of a person who dies or is unable to work. The purpose of auto insurance is to protect your assets and income.
If you don’t have auto insurance, and you are involved in an accident, regardless of which party is at fault, you’ll be paying expenses yourself that an insurance company would usually pay for. If you are sued you will have to arrange for defense of the lawsuit. This usually involves hiring an attorney experienced in the defense of automobile liability cases to represent you, which can be extremely costly. You will have to pay the attorney’s fees and other court related costs, even if you ultimately are found not to be legally responsible for any damages.
If you are found to be liable for causing damages to the party who sues you, a “judgment” will be entered against you for a specific sum of money. The amount of the judgment could be a very large sum of money, potentially hundreds of thousands of dollars. You will be required to pay for the extent of the damage and the severity of the injuries that you caused. If you fail to pay or are unable to pay the full amount of the judgment, the party who obtained the judgment becomes one of your creditors and could start legal proceedings to collect the money from you.
Your insurance policy can provide other very valuable benefits to you. Most states require drivers to purchase a minimum amount of insurance coverage to legally operate a vehicle, but many people still drive without it and cause accidents. You can purchase insurance coverage that will protect you in the event you are injured or your vehicle is damaged by a driver who is not insured. You can then be compensated for any injuries or losses without having to collect from the uninsured person. Other provisions available in some states will pay your medical bills for accident related treatment or increase the amount available to cover your injuries if they exceed the other driver’s policy limits.