The concept of insurance has been around for thousands of years, but of course cars have not. With the development of automobiles, state governments felt it necessary to ensure those who operate a vehicle had compensation in place to pay for bodily injury and damages that may be caused while behind the wheel. The first state to make auto insurance mandatory was Massachusetts and the law went into effect in 1927. The latest state to mandate automobile coverage was Wisconsin which only began requiring drivers to become insured on January 1, 2010.

The state of New Hampshire has yet to set a law in place which requires motorists to carry vehicle policies and Virginia will allow residents to pay a $500 Uninsured Motor Vehicle (UMV) fee in lieu of purchasing automobile coverage. Although these are options that motorists may have, it is strongly advised to purchase a car insurance policy rather than drive uninsured; this can leave a motorist at risk of incurring expenses resulting from a traffic accident which they may cause.

What Type of Auto Insurance is Mandatory?

Every state has a different level and in some cases types of automobile coverage that is required in order to be in compliance with the state's legal requirements. Practically every state requires that motorists carry Property Damage Liability (PDL) which will pay for damages caused to the property of another party by the insured while operating a vehicle up to the limits of the policy. Dependent on the state, the mandatory limits can vary greatly; states such as Alaska and Maine require motorists to purchase $25,000 in property damage liability coverage as a minimum, but Arizona and Florida only require $10,000 and the other states can range from $5,000 to $25,000.

States also vary when it comes to coverage for bodily injury; some may require motorists to carry No-Fault or Personal Injury Protection, Bodily Injury Liability and/or Uninsured/Underinsured Motorist. A state such as New York requires drivers to carry all three, but the state of Ohio only requires motorists to carry bodily injury liability. Uninsured Motorist is required in many states, but in some the consumer has the option to waive this coverage; California allows consumers the ability to opt out of this coverage at the time a policy is purchased with a signed notice provided by the insurer. As mentioned, laws across the country vary significantly and motorists may want to contact their state insurance regulator for any clarification of requirements whenever unsure about an issue.

Although not mandated by any state, it may be mandatory for an individual to purchase Comprehensive and Collision coverage. This is usually required by a financial institution as part of a loan agreement when a consumer finances a vehicle and covers physical damage the automobile may sustain. Failure to maintain this protection can result in the lender placing "forced insurance" on the loan which will then be charged to the borrower; these policies are often much more expensive than if the borrower had maintained the coverage on their own.