system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: How does car insurance work and why it is mandatory to have it?
gpt
The legal minimum is liability insurance.  Since it's very easy to cause hundreds of thousands of dollars of harm to someone else, states usually require you have some way of paying any damages in such a situation. 

The preferred way is an insurance plan: you pay an insurer a monthly/annual amount and they agree to cover most of any claims you are responsible for paying in the event of an accident you cause.