No matter how good a driver you are there is a chance that you could cause an accident in which people gets injured or suffer property damages. In the light of this possibility, every state wants to make sure that motor vehicle owners make some sort of provision to pay for such losses. The easiest way of complying with such requirements is to buy car insurance liability coverage.
It is up to states to make sure that motor vehicle operations are regulated. That is why you need to register them with local DMV. You need to get a driving license if you want to operate a vehicle. And you need to show that you can pay for the damages you could cause to other citizens in case of traffic accidents.
You need to purchase at least minimum liability coverage to comply with nearly all financial responsibility laws. Otherwise they will not register it. Also local DMV constantly checks the status and penalizes the owners, unless they confirm that it is off the road.
Not all states require vehicle insurance as proof of financial responsibility. Three of them may accept bond purchase, cash deposit or proof of asset allocation to provide for possible liabilities. Virginia allows a fee payment for an uninsured vehicle for one year only. New Hampshire and Mississippi allows posting bonds instead. All the other 47 states and District of Colombia insist on having an auto liability policy in force.
There may be another option in a large-scale operation. For example, a large company with many vehicles may find it cheaper or more practical to self-insure them all and go through with proving that it makes the cut.
In general, auto insurance is the easiest way to comply with the requirements. If you ever cause injuries and damages, your insurer not only covers the claims against you (up to the limit) but also defends you. Probably it would cost you a lot more to deal with a claim against you if you were to choose another method to satisfy responsibility requirements.
Again, each one has their own rules and you can find out more by choosing it from the list. Every policy sold in a state would automatically include the minimum liability coverage enforced. Then, it is up to you to add more options like comprehensive and collision, recovery and accident forgiveness.
You should also consider the benefits of buying an automobile policy. It is not just about staying within the rules but also making sure that you are well protected for every eventuality. Full coverage includes comprehensive and collision and not only pays for claims against you but also compensate your own losses. Considering you may only need to pay few hundred dollars more for it you might as well have it in order to sleep well at night, knowing you are protected.
Also, each of them has different penalties for drivers with no insurance. Depending on where you live, a car may be impounded, license plates taken away, driving licenses suspended and hefty fines applied. Again, check the rules if you want to learn more. Penalties are usually harsher if it is caught after an accident. And there is a high chance that you will be taken to court for it.