Car insurance prices are rising, and drivers may be wondering what would happen if they simply skipped coverage to try to save money.
Premiums have increased more than 20% in the past year, and experts predict that auto insurance prices will increase further in 2024. As a result, the number of Americans driving without auto insurance is also on the rise, according to J.D. Power.
“The general trend over the past couple of years is for more Americans to be driving without insurance as premium increases collide with strained family budgets,” says Stephen Crewdson, senior director of the insurance intelligence group at J.D. Power.
To put it bluntly, it’s a horrible idea not to have car insurance. Car repairs and medical bills can be extremely expensive in the event of an accident without insurance, making it reckless to forego coverage. Driving an uninsured vehicle is also usually illegal and you could find yourself in serious legal and financial trouble if you get pulled over or get into an accident.
Violators usually face a fine of $1,000 or more. Depending on the state you live in, your license or registration may be suspended if you are caught driving a car without insurance, and your vehicle may even be impounded. You may also have trouble getting affordable car insurance in the future because you will have a coverage gap on your record.
“Insurance is something you buy for the unexpected,” says Todd Greenbaum, president of Input 1, a provider of digital billing and payment services to the insurance industry. “There’s no good reason to go without it. I understand that people struggle financially, but the best option is always to find a way to purchase insurance within your budget instead of giving it up altogether.”
What happens if you don’t have car insurance?
A significant portion of American drivers are uninsured. The number of households who own a vehicle and report not having insurance was 6.2% in January, up from 5.3% in the second half of 2022, according to J.D. Power.
People who drive without insurance may experience some of the following consequences:
Expect to be hit with a fine
In all but a few states, auto insurance is required by law at minimum liability levels. Fines can exceed $1,000 for violating these laws.
“First there would be the legal consequences,” Greenbaum says. “If you don’t have car insurance, you will be breaking the law and this can lead to hefty fines.”
Legal problems can become more serious
Authorities may charge you with legal offenses if an officer believes you cannot provide insurance at their request after a speeding accident or car accident.
Stuart Winchester, CEO of insurance buying startup Marble, says your vehicle could be seized, which is common in states including California.
“This is definitely on the table,” he says. “You would have to pay for the tow and pay the fees to seize it and then release it.”
Your license or registration may be suspended
There is also a good chance that your license or registration (and perhaps both) will be suspended if you are found to be violating state insurance requirements.
You probably won’t be able to resolve the situation until you have proof of insurance, and in some states, you may not be able to get your license back for a year.
“Think about it: If you need to drive to work, or you’re a parent and you have to drive to pick up your child, or take them to school, I mean, those are significant detriments to your ability to live your daily life,” says Greenbaum.
In serious cases of repeat offenders, driving without a license can even lead to prison.
Getting car insurance will be more expensive in the future
If you have a lapse on your car insurance, you could face consequences even if you don’t get caught. With a coverage gap in your insurance history, you will likely have to pay a higher premium when you try to get coverage again in the future.
Additionally, drivers who have had their license suspended usually must file SR-22 forms with their state verifying that they have minimum liability coverage. If you need an SR-22 for auto insurance, you will likely have to pay a higher auto insurance premium.
Bills can add up after an accident
If you don’t have car insurance and you get into an accident, you could quickly be responsible for tens of thousands of dollars in car repair or replacement bills, property damage, and medical bills.
Even though the cost of auto insurance has increased faster than any other expense category, most people will find that it is worth maintaining insurance.
What to do if you can’t afford car insurance
Instead of driving without insurance, Americans in financial trouble would be far better off finding strategies to lower their auto insurance premiums, often by reducing their coverage. Make sure you have at least the minimum amount of liability insurance required by your state, if that’s all you can afford.
Raising your deductible to a high level like $2,000 is another way to get a cheaper auto insurance premium if you’re in a pinch. You’ll pay more out of pocket when you need to use your insurance, but you could always change your policy again if your financial situation improves.
The pace of auto insurance premium increases is expected to definitely slow down later this year, according to J.D. Power.
“As other inflationary impacts ease, hopefully more Americans will find they can afford adequate auto insurance coverage as 2024 comes to a close,” says J.D. Power’s Crewdson.
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