How Car Insurance Works

• Car insurance, like all kinds of insurance, is a contract between you and an insurance company. You promise to pay a certain amount of money each year -- often divided into smaller installment payments. The company promises to pay for damage caused if you are at fault in an auto accident. This payment is limited to a specific amount specified in your policy, and repairs to your car may be subject to a deductible. When you get in an accident that's your fault, your insurance company takes responsibility for the financial burden of the damage.
  
  

Uninsured Motorists

• If an uninsured driver gets into an accident in which he is at fault, the financial damage of that accident still happened. Car insurance policies often include an "uninsured motorist" clause, which means that insurance company will pay for the damage suffered by the policy owner -- in fact, some states require this kind of coverage. However, the insurance company has the legal right to come after you personally to recoup their expenses from the damage you caused.
  
  

Other Consequences of Driving Uninsured

• If you are in an accident -- or even ticketed -- while driving without insurance, your problems don't stop at personal financial risk. Only two states in the U.S. don't require drivers to carry insurance, and proof of insurance. Although consequences vary from state to state, typical penalties range from a fine to impounding or even confiscating your car.
  
  

Can You Be Sued for Being Uninsured?

• Not exactly. There's no actual financial harm to another person just from driving uninsured, so you can't be sued just for that. However, an individual or insurance agency can sue you for damages you caused while driving uninsured. Note that this also applies to any damage caused by an accident where you're at fault, and carry insurance that's insufficient to cover all the expenses.