Don’t own a car? Do you still need auto insurance?
One of the most common myths that we hear is that “I sold my car so I don’t need to keep my car insurance“.
Technically this is not true in most cases. Here is why:
Most if not all state laws have driver responsibility rules. Even though you don’t own a car, if you want to drive a car, under most state laws you are still required to have an auto insurance policy. The
type of policy available to those who don’t own care is called Non-Owner Auto Insurance.
What is Non-Owner car insurance?
Non-owner car insurance protects you in the event you’re determined to be at fault in an accident while driving a vehicle not owned by you, such as a rental car. It’s secondary coverage that pays for damages above and beyond what might be covered through the car’s primary insurance.
But my friend has auto insurance on the car I am borrowing. While this might trick the police officer if you get pulled over into thinking you are covered, you might not be. Not all auto insurance policies are created equal. There is a coverage called “permissive use” which allows auto insurance to cover other drivers who have permission to drive the vehicle. Not all policies include this coverage, sometimes it might be available but you have to pay for that endorsement, others automatically include it.
So that is the legal reason why you still want to keep coverage active even if you don’t own a car. Now for part two, your finances.
But I will save money if I cancel my car insurance if I down own a car and don’t plan on driving. This statement is true until it is not. What I mean by this is two things:
- When you need to buy auto insurance next time.
- Insurance companies don’t like this because there is a gap in your coverage. Insurance companies look at the ability to keep constant insurance as a sign of responsibility which equates to taking care of your stuff which to them means fewer claims in a long roundabout way. What does this mean for you? I keep an insurance policy active with no gaps in coverage then you will pay less for your auto insurance in the long run. There are discounts built-in for having prior insurance and it is a BIG DEAL for you.
- Coverage. When you understand what insurance really is, the coverage matters. Everyone hates the insurance companies because they think they are getting screwed. What they don’t realize is they are screwing themselves and don’t even know it. Insurance is a contract, it says if you do this or if this happens to you then we will do this. While it is not that simple, in the real world, the coverage matters when you need it.
- What if you need to rent a car? Same thing as borrowing a car from a friend right? Except for the pay them rent for the car. Long story short, you are required to have insurance, just like if you borrow a car.
- What if you received a violation on your driving record and still need to drive? How will you show you have insurance?
- What if you get in an accident in your friends car and they sue you? Your friends insurance doesn’t have any duty to defend you, so you are on the hook for all your own legal bills.
- What if you get hit by a car while walking down the street and they don’t have insurance? Your uninsured coverage could kick in to help protect you from financial loss due to those expenses from the accident.
Long story short, yes you can save some money in the short run, but it will cost you more in the long run.
When it comes to insurance, any insurance, remember this: Just because you can, doesn’t mean you should.
Want to know more on how to make your insurance dollar more efficient, contact us here for a consult. Let’s create a plan to get the most with what you have.
- You’re required to show proof of insurance.
Even if you don’t own a car but have a major violation on your driving record and still need to drive, your state may require liability coverage. Non-owner car insurance is a simple, affordable solution.
- You plan to borrow your friend’s car from time to time.
If you plan to drive a vehicle you don’t own from time to time, it’s smart to have basic liability coverage in place. And based on where you live, basic liability coverage might be required.
- You’re in between vehicles.
While you can technically cancel your previous auto insurance policy, swapping it for a less expensive non-owner car insurance policy keeps you under continuous coverage, saving you money in the long run.
- You can’t afford a car but still, need to drive.
Not having a car doesn’t mean you don’t need car insurance. If you still plan on getting behind the wheel, a non-owner policy will protect you on the road. And by avoiding a lapse in coverage, your rate will improve if you own a car again in the future.
- You rent a car on occasion.
If you rent a car for more than 10 days a year, consider a non-owner policy. It might be cheaper than the pay-per-day rate from the rental company.