In an interview with George Stephanopoulos, President Obama said, “right now everybody in America, just about, has to get auto insurance. Nobody considers that a tax increase.” On CNN’s American Morning show, anchor John Roberts repeated the auto insurance analogy in his interview with former House Majority Leader Dick Armey, who opposes ObamaCare: “But why is it mandate for having health insurance a bad thing? There’s a mandate for having car insurance.”
The analogy is false in several ways. Let’s look at automobile and homeowners’ insurance. Mortgage companies require homeowners’ insurance. If your mortgaged home burns down, the finance company wants to be sure that it will get its money back, so it requires you to carry insurance for their benefit. If you own your home free and clear, there is no requirement to carry property insurance. You own the property free and clear, so the risk is all yours.
Automobile insurance operates in a similar way. Once a car is paid off, there is no requirement to carry collision insurance, which covers theft, fire, vandalism, and weather damage, because it’s your car. In fact, once a car’s resale price drops below a certain point, many people drop their collision insurance since the cost of the insurance can be more than what the car is worth.
Liability insurance is a different matter. It’s required to protect other drivers and other people’s property. If you are at fault in an accident, and you damage someone else’s property and also hurt a person physically, you are liable. This is why states, not the Federal Government, require automobile insurance. There is no requirement for people to purchase insurance if they swim, rock climb, use a chain saw, skate board, work on a roof during a storm (as I did a few months back), or engage in any other type of dangerous activity since the damage they may do is only to themselves. Companies that service risk-related behavior may require a participant to sign a waiver that states the company is not liable for injury.
So the next time you hear someone comparing auto insurance with health insurance, you’ll know what to say.