Non-Owner Car Insurance: Who Needs It?

You might, if you drive others' cars and want to avoid financial risk

Virtually every state in the U.S. requires car owners to have automobile insurance. But it’s also possible—and sometimes smart—to buy a policy even if you don’t own a car. Here's how to know whether you should consider non-owner car insurance and where to get it if you decide in the affirmative.

Key Takeaways

  • Non-owner car insurance is for people who don't own a car but may drive someone else's vehicle occasionally.
  • A non-owner policy typically covers damage to other people and property but not to you or the car you're driving.
  • This insurance may be useful if you frequently rent or borrow cars and want to protect yourself from an expensive lawsuit.

What Is Non-Owner Car Insurance?

Non-owner car insurance is a type of liability insurance available for people who don’t own a car but may occasionally drive someone else’s automobile. It covers bodily injury and property damage claims if you are found to be at fault in an auto accident. In that way it is similar to the bodily injury and property damage liability coverage most states require you to have if you own a car.

Unlike a regular auto insurance policy, non-owner car insurance typically doesn’t offer optional collision or comprehensive coverage. Collision insurance covers damage to the car you’re driving if you’re involved in an accident with another car or hit a stationary object, such as a tree or guardrail. Comprehensive insurance covers damage to the car from other causes, such as fire or vandalism.

Non-owner car insurance generally doesn’t provide medical coverage for you if you are in an accident—although this can vary by state and according to the policy you purchase.

This type of car insurance is considered secondary coverage. That means it pays claims only after the car owner’s policy has paid up to the limits of its coverage.

Should You Buy Non-Owner Car Insurance?

If you already have a regular car insurance policy, you don’t need non-owner car insurance, even if you occasionally drive cars that belong to someone else. Non-owner car insurance makes the most sense if you are an uninsured driver and one or more of the following is true:

You borrow cars with only minimal liability coverage

If you borrow a car from someone whose car insurance policy only meets their state’s minimum liability requirements and you have an accident, you may be liable for any bodily injury or property damage claims that exceed the coverage on that policy. Some states set very low minimums (such as $10,000 or $15,000 per person for bodily injury), and medical bills resulting from a serious accident could run many times that. In a worst-case scenario, you could become involved in a costly lawsuit that would put your home and other assets at risk. Also bear in mind that if you regularly borrow a particular car, such as from another member of your household, you might not be eligible for a non-owner policy; instead, the law may require that your name be added to that car owner’s policy.

You frequently rent cars

Your credit card may already provide some insurance coverage when you use it to rent a car. However, that coverage is typically limited to damage to the car itself and doesn’t include the kinds of liability coverage that a regular or non-owner insurance policy offers. According to the Insurance Information Institute, rental car companies are required by law to provide the minimum amount of liability insurance coverage mandated in that state, but as we’ve mentioned, that may not be adequate in a serious accident. A non-owner auto policy can afford you a greater level of protection, just in case. This also applies to so-called car-sharing services.

You want to avoid a gap in your insurance coverage

If you have a regular car insurance policy and decide to give up your car for a time, you may be tempted to drop your car insurance altogether. The problem is that if you later buy another car and reapply for insurance, you’re likely to be treated as a higher risk—and compelled to pay higher rates—than if you’d maintained coverage all along. If you find yourself in this position, the best thing to do, before you drop your policy, is to ask if your insurer offers non-owner policies and whether you’d save money in the long run by purchasing one.

You need SR-22 coverage

Some states require drivers who have been convicted of major traffic offenses, such as driving under the influence (DUI) or driving while intoxicated (DWI), to obtain a certain amount of liability coverage even if they don’t own a car. This is usually referred to as an SR-22 form or certificate of responsibility (in Florida and Virginia, it’s called an FR-44). Purchasing a non-owner car insurance policy is one way to satisfy that requirement.

If you're considering getting rid of your car and dropping your regular insurance, ask if your insurer offers a non-owner auto policy. That could help you avoid a costly gap in coverage should you decide to own a car again.

Where to Buy Non-Owner Car Insurance

Non-owner car insurance is sold by many, but not all, major auto insurers, as well as some smaller companies that specialize in this market. Some major insurers offer it only to current customers who are giving up their cars and dropping their regular insurance policies but want to maintain insurance coverage for the reasons described above. Temporary car insurance policies may be a good option for those that need protection for a limited period of time.

As with most types of insurance, it’s a good idea to check with your state insurance department to see if the insurer is licensed to do business in your state and whether the department has any complaints on file. That’s especially true if it’s a company you found online and have never heard of previously. Many state insurance departments post that information on their websites. The National Association of Insurance Commissioners (NAIC) also has a Consumer Information Search tool, where you can look up insurers and check on any complaints against them.

An independent insurance agent in your community could also be a good resource. Independent agents work with a variety of different insurance companies and can often help you find an affordable policy from one they know to be reliable.

Finally, it’s worth shopping around. While non-owner car insurance is likely to be significantly cheaper than a regular policy, prices can vary from company to company. The levels of coverage you choose and how safe (or risky) a driver the insurer considers you to be will also factor into the price you pay.

Article Sources
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