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You are legally required to carry auto insurance if you drive a car. When a police officer pulls someone over for speeding or violating a traffic law, the officer immediately asks for their driver's license and insurance card, and if they don't have insurance, they will get a ticket.
There are two different types of auto insurance. Most people purchase liability auto insurance, because in many states this is the only type that's required by law. Liability auto insurance protects you and other drivers against financial loss resulting from an accident.
Liability auto insurance is required in all states because courts hold the person at fault financially responsible for the accident, and the victim shouldn't be stuck with the financial burden. If you have liability coverage, then your auto insurance company will pay for the damages inflicted on another person and their car, if you are at fault for the accident. But your auto insurance will not pay an infinite amount. You will usually have to pay a deductible first, depending upon your coverage, and then the policy will cover up to a predetermined limit. If a settlement goes beyond this limit, you will need to come up with the money.
The other type of auto insurance is collision or comprehensive insurance. This type covers the damage caused to your own vehicle after a car accident or collision.
