Is Car Insurance Really Important?
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Is Car Insurance Really Important?

There are many auto insurance companies out there.

Depending on where you live, you may have options like Geico car insurance, Esure car insurance, Axa car insurance, Saga car insurance, progressive car insurance, Churchill Car insurance and the list could go on and on.

But with all these options, you may be asking yourself…

Is Car Insurance Really Important?

Well, this depends on a few factors; the type of vehicle you own, the legal requirements for your city or state, your driving style (aggressive vs. conservative), and where you operate your motor vehicle.

My personal, short answer is if you own a vehicle that you regularly drive on public roads (shared with other motorists), then you absolutely need car insurance! I am a firm believer in better safe than sorry, especially when it comes to financial risk, and factoring in other people’s actions in relation to my daily life.

Do I Need Car Insurance for a Clunker?

Car insurance is no-brainer if you drive a vehicle on public roads; regardless of how much your vehicle is worth. Whenever you get behind the wheel of your car, you’re taking legal responsibility for your actions, and may suffer the consequences of someone else’s. A simple fender bender can cost hundreds of dollars to repair, and that’s not even counting the costs of the other parties involved.

Your car may only be worth $1,000, but the car you could accidentally hit as you change lanes is probably worth significantly more. In fact, according to CNN Money, the average cost of a new vehicle is $25,000.

This means that you’re looking at a potential liability of over $26,000 to cover the expense of repairing the damaged vehicles involved in our hypothetical accident.

A Tale of Two Accidents and the Impact of Car Insurance

Fast forward to a few weeks after your hypothetical accident. Now you’re in court because the other motorist is suing you.

Below I’ll lay out two scenarios for you:

Option A is with a solid auto insurance policy, and option B is your potential reality without auto insurance.

If you have a solid car insurance policy, your car insurance company may have provided your lawyer, and you’re only looking at the potential of paying your deductible in order to make everyone whole. Now the judge will decide who was at fault based on the police report and witness statements.

If you’re found to be at-fault, then your insurance policy should cover the costs above your deductible and significantly minimize any other out of pocket costs.

Worst case scenario; your premium goes up on your auto insurance policy, you get some points on your license, and you have to fork over some cash to cover your deductible.

This is a very different story if you enter the courtroom without automobile insurance. If the judge finds that, based on the available evidence, you’re at fault for the accident, you’re on the hook for EVERYTHING.

This includes the cost of hiring an attorney to defend you, potential legal fees for the other party, medical bills for everyone involved, the cost of repairing the other vehicles, and even “pain and suffering”.

A simple fender bender can turn into thousands of dollars that you have to pay in order to make everyone whole.

Bottom Line:

Car Insurance is Absolutely Necessary if You Own and Operate A Vehicle on Public Roads. It forms a crucial part of any wealth building strategy. If you are serious about building wealth, you need to be focusing on three things: making more money, spending less than you make, and investing the difference.


Street Talk

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