Why are drivers generally required to carry liability insurance (or proof of financial responsibility)?

Most states require drivers to carry liability insurance, or otherwise demonstrate financial responsibility, so that if a driver causes a collision, there are funds to pay for the injuries and property damage suffered by others. Liability coverage protects victims and the at-fault driver from catastrophic out-of-pocket costs. Driving without required insurance can lead to fines, license suspension, and personal liability for damages. Minimum coverage amounts and rules vary by state, and drivers usually must carry proof of insurance and show it when requested. Understanding the purpose of mandatory insurance is part of the license-and-insurance rules of the road.