Most of us get auto insurance thinking, “I own this car, so I need to insure it.” Unfortunately, insurance scenarios aren’t always so cut and dry. For instance, you can get auto insurance if you don’t own a car; you simply take out a special non-owners insurance policy. But what if you wanted to insure a specific car you didn’t own? Would an insurance company cover the car?
In some circumstances, yes, you can insure a vehicle you don’t own, but it’s difficult to become the primary policyholder on a car that’s not yours — and it’s extra tricky to get coverage if you don’t live with the vehicle’s owner. Here’s why.
Insuring a car you don’t own
When you apply for a policy, auto insurance companies look to see if you have what’s known as “insurable interest” in the vehicle. If you own the car, that interest is clear.
You have “a strong motivation — in the form of financial loss if the item were damaged or destroyed — to protect it,” Ben Guttman, an advisor with insurance advisory firm Heller Kowitz in Lutherville, Maryland, says.
If you don’t own the car, well, things get murky.
“Insurers [worry] you may not take the necessary effort to keep [the car] from being in an accident because you wouldn’t really be losing anything,” Guttman says. “You might even be enticed to damage the vehicle if the legal owner gets on your bad side, because it would be their loss and not yours.”
There’s another reason why trying to insure a car you don’t own kicks insurers’ spidey-sense into overdrive: Sometimes, it’s a sign of insurance fraud.
“Basically, you have to have at least some ownership in the car to have rights to the financial benefit of insuring it,” says Brent Thurman, owner of Keystone Insurance in Provo, Utah. “This is what prevents things like neighbors pooling their cars together onto one policy in an effort to get a better rate, or someone arbitrarily adding another person’s car so that they can get paid if that car has a loss.”
How can I insure a vehicle car I don’t own?
Of course, there are plenty of legit reasons why someone needs to insure a car they don’t own. A common scenario involves parents gifting an old car to their kid, or a grandparent granting primary use of their vehicle to their grandchild once they stop driving regularly. Sometimes, there’s a quick fix for families. If you still live with the ‘rents, for instance, they can usually just add you as a driver on their policy. Separate addresses, as we intimated earlier, make matters more complicated, but there are ways to get it done. Here some strategies to insure a car you don’t own.
1. Get the car co-titled.
You don’t necessarily need to own the car to get it insured; you can often simply add your name to the title.
“You need some insurable interest,” Thurman says. Co-titling “is more difficult to do if there's a loan on the vehicle, but if the vehicle is paid off, it's a small fee at the DMV and you're home-free.”
2. Demonstrate need.
Outside of co-titling, you can sometimes convince the insurer to cover the car if it’s your only mode of transportation and you plan to drive it regularly. Say, you need the car to commute to a job, you can’t afford one of your own, and there’s no public transportation nearby.
“Some carriers will insure it if you have constant control and custody of the vehicle,” says Guttman. “Where this often comes up is kids who have their parents’ car at college. I just wrote a policy where the insurer was fine with it, as long as the parents were additional interests on the policy.”
3. Check each carrier’s rules.
Some insurance companies decline coverage even if you do live with the vehicle’s owner, but some don’t. “This is intended to apply to live-in partners and common law marriage situations,” Thurman says.
There also might be that one insurance company that will grant you insurance if you don’t have ownership of the car or live with the primary title holder or have any insurable interest in the car. In other words, it helps to shop around and ask a lot of questions.
“Call around and ask each insurance carrier if they'll allow it since underwriting can be different from state to state, even with the same insurance company,” Thurman says.
4. Be open and honest with insurers.
You don’t need to give an insurance company a huge sob story, but it helps to be honest about your situation. Give them all the details they need pertaining to your driving record, financial history, and where, when and how often you plan to drive the car. If applicable, tell them you need an insurance policy to drive the car while you’re saving up to buy it. Hiding information, conversely, could turn off an insurance company that otherwise would have given you a chance.
5. Explore other insurance options.
Remember, you can always take out a non-owner’s car insurance policy until you can buy the car from its owner, add your name to the title or find a carrier who will insure the vehicle, non-ownership status aside. Non-owner’s insurance is limited. It’ll only offer you liability coverage (no comprehensive, collision, etc.) as it’s intended to insure you when borrowing a car or driving infrequently. Still, it gives you some insurance and access to the car for the time being.
Getting ready to buy a car? Here are six things to know before buying car insurance.