Automobile Insurance Is not the Same as Health Insurance

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.” Mitt Romney made similar comments when he was interviewed by Fox News’s Bill O’Reilly. Here are some of Romney’s comments during the Tampa debate:

The government, of course, has a lot of mandates, and I know folks don’t like that, but mandates kids go to school, mandates they have to have auto insurance if you have an automobile. And my conservative friends say, “Well, we don’t have to have automobiles,” and it’s like, well, what state do you live in? Of course you have to have automobiles in this nation, and the plan that we put in place was one that was put together by Republicans and Democrats, it works for Massachusetts –

I’m sure there are lots of people in America who do not have automobiles just like there are lots of people who don’t own homes.

The above analogy by Romney is false in several ways. Let’s look at automobile and homeowners’ insurance. Mortgage companies require homeowners’ insurance. It’s not mandated by states. 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 — to protect other people and their property. If a car owner can’t afford the insurance, the government doesn’t pay it or tax other people to pay it or mandate that a person’s employer pay it.

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 dangerous activities 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.