• You must usually show proof of insurance when stopped by an officer.Jupiterimages/Photos.com/Getty Images
  
  Many people go extended periods of time, sometimes their whole lives, without ever filing an auto insurance claim, and therefore it is sometimes hard to understand why car insurance is mandatory nearly everywhere you go. New Hampshire is the only state in the union, as of November 2010, that only requires auto insurance when you have an accident, and not for everyday driving. Despite this, there are several good reasons why auto insurance is mandatory.
  
  

Protect Other Drivers

• The most basic reason for mandatory auto insurance is so every driver has the financial ability to pay for injuries and damages caused to other drivers on the road. Medical costs and vehicle repairs are often much more expensive than the average person can afford out of pocket, so without insurance, many people would not be able to pay for the damage they cause. If insurance were optional, those who chose to purchase it would have to buy uninsured motorist coverage to protect themselves against irresponsible drivers, and the cost would likely be very expensive.
  
  

Protect Your Assets

• If you were forced to pay someone's entire medical bill and vehicle repair with your own money, you might lose your asset base doing so. With medical costs that routinely go into the tens and even hundreds of thousands of dollars, optional insurance would cause a dramatic increase in personal bankruptcies, foreclosures and liquefied assets just to pay for common vehicle accidents.
  
  

Protect Investment in Your Vehicle

• Many people do not buy vehicles with 100 percent cash. Rather, it is typical to put some money down and finance the balance of the vehicle with a car loan. The only reason banks and credit unions are willing to lend money for this purpose is because of mandatory physical damage insurance. Though this is not required by law, it is typically required as a condition of the loan. If this coverage were optional, many people would not be able to afford to buy vehicles.