Insurance in the United States since it was founded in 1752 by Benjamin Franklin, has been a very lucrative industry. Not just for the insurance companies but also for policyholders. Thanks to insurance – mandatory policies or otherwise,  people can go about their lives knowing that whenever there is a sudden mishap they can at least get financial assistance. Through Health insurance policies, for example, both the US government and insurance companies have been able to provide millions of Americans, (even low-income earners) with price subsidized health care services. Government insurance programs like Medicaid and Medicare are perfect examples of how insurance has been favouring policyholders over the years. 


In some cases, Insurance policies provide their policyholders with financial coverage when they cause damages to a third party. Due to the risky nature of some aspects of our lives, it is necessary we protect ourselves from the eventualities of an accident, especially if we are found liable for the damages caused. This is why the government has made it compulsory to get insurance policies in some sectors.


Compulsory Insurance and why they are necessary

Compulsory insurance is any form of insurance policy that is mandated by the law for a person or an organization to buy, so as to cover them if they cause damages to a third party.

As long as we are in constant physical interactions with ourselves, we are at risk of causing damages to other people’s properties or causing injuries to them. The injured third party might sue and if you are found guilty the legal fees and compensation might be too heavy for you to pay. This could be a burden on both you and the victim.

For example, in an auto crash accident for example, if the affected third party is severely injured and will have to spend a lot in hospital bills at the same time pay legal fees for the court case against you. If you are found liable in this type of scenario you will be made to pay some part of the hospital bills, if not all and also the legal fee of the victim while scrambling around trying to pay yours. I know you can feel your head spinning out of control already. See why compulsory insurance policies are necessary now? It can be the reason why you don’t catch a stroke.


Who Decides what Insurance Policies are Mandatory?

In the United States, the state governments are responsible for deciding what kind of insurance plan to make mandatory in their various states. For example, in New Hampshire, car insurance is not mandatory but as a driver in California, you are required by law to always have proof of car insurance in your vehicle and you must issue it when requested by officers of the law.



Compulsory insurance differs in states but there are a few that are commonly mandatory in most states. 


Automobile insurance

Automobile Insurance is one of the mandatory insurance policies one must have in America and a lot of places in the world if you own a car that you intend to drive around. It’s no telling what might go wrong while driving.

Sometimes it could be a car hardware failure or just clear negligence on your part that causes a car accident which will leave the other person’s car damaged or cause personal injuries or in the worst case, cause death. In order to make sure that you are able to cover both legal and medical bills of the third party, the state governments (except New Hampshire and Virginia) have made it compulsory for every driver to have auto insurance also called car insurance and they also determine the amount of coverage your policy must cover.

State governments now allow for digital car insurance proof. That is, unlike the old days when the proofs were presented on a written sheet of paper, people can now have them on their phone or tablets which makes it easier for you to have it on you at all times because it is an offence to not have it on you when requested for.


Motorcycle Insurance

Motorcycle insurance is also compulsory in all states in the US except for Florida. It’s kind of like car insurance but for motorcycles. A motorcycle driver must be insured so as to cover the third party if the policyholder causes damages or hurt to anybody. The insured party must also be able to make digital proof available for law enforcement officers when requested for.


Even though it is mandatory to get this kind of insurance people still evade getting it. Some say the insurance premium is too expensive for them while the others just don’t see any need for it because they have a high traffic violation rate so their premium will be higher than usual. People like this should be ready to face the long arm of the law if nabbed.


Workers Compensation

Workers compensation is important for business organizations that are responsible for the safety and well being of employees. Employees are an important part of every company so they must be protected while carrying out their duties.

If an employee suffers injuries or damage to property while working for a company, most state governments have made it compulsory for the company to compensate such workers. The worker in return gives up his right to sue the company if his/her compensation is paid. 

This type of insurance like car and motorcycle insurance is designed to protect both parties from financial burdens caused by the policyholder’s negligence.  Workers compensation covers the employee’s wages while recovering from the injury sustained while working for the company. In the case of an employee losing his/her life, the insurance policy also covers death benefits for the late employee’s beneficiary. 


Professional liability insurance

In a number of US states, it is mandatory for physicians to have a certain minimum amount of professional liability insurance. The job of Physicians is so delicate and can cause a lot of complications to a patient or can even lead to death if not performed effectively. In a situation where a physician gets things wrong and it leads to more harm for a patient, the physician could be sued for an outrageous amount of money. This is why physicians are mandated in some states to have professional insurance coverage.  


Is health insurance mandatory in the US?

People are usually confused as to whether health insurance is mandatory in the USA. The answer is simply no. Health insurance is not one of the compulsory insurance plans in America, it is only compulsory for it to be subsidized because of the Affordable Care Act (ACA).


Here are some other types of insurance that are not mandatory

  • Private mortgage insurance
  • Extended warranties
  • Automobile collision insurance
  • Flight insurance
  • Car rental insurance
  • Life insurance
  • Home insurance


Mandatory insurance policies are important, not just to make money for the insurance companies but because they help protect everybody when the unexpected happens.

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