Do I need car insurance when I don’t own a car?

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Here's what you need to know...

  • Legally, anyone who owns a vehicle and has it registered in their name must buy insurance to pay for third-party damages
  • Third-party liability coverage pays for the damages that you cause to someone else and for medical bills if someone else is injured
  • The actual required limits vary by state
  • Drivers who are licensed but don’t own a car may still need car insurance to protect them while driving non-owned cars
  • Non-owners car insurance will provide Bodily Injury, Property Damage and in some cases Medical Payments coverage for the policyholder when driving a borrowed or rented car
  • Non-owners coverage has specialized provisions saying that cars owned by household members are specifically excluded

When you don’t own a car, you can avoid taking on loads of different expenses that come directly with car ownership. From tax and registration fees to money for repairs and maintenance, owning a car can cost you a small fortune. While you might assume that you don’t have to take on an insurance bill when you don’t own a car, that’s not always the case.

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Car insurance is an expense that you may need to take on with or without a car. If you’re not licensed to drive or you’re licensed but don’t actively use your driving privilege, you don’t have to worry about being exposed to potential losses. If, however, you’re licensed and you do drive from time to time, it’s important to seriously consider buying a specialty insurance policy that protects you from everything that you’re exposed to on the open road.

Are you required to carry auto insurance under state law?

Almost all states in the U.S. require individuals who own vehicles to buy insurance. Insurance requirements are in place to ensure that individuals are financially able to pay for damages that they cause while operating their car. States will either operate under a tort law system or a no-fault system.

Tort-based laws use fault to determine which insurer will pay for damages and no-fault states don’t.

Either way, an owner will need to comply with state law by purchasing auto insurance or proving that they are financially responsible in other ways. Some alternatives to buying insurance in states with financial responsibility laws include:

  • Posting a cash deposit with the DMV
  • Obtaining a DMV-issued certificate of self-insurance
  • Purchasing a surety bond from a company licensed in the state

Buying Insurance Without Your Own Vehicle

State law only pertains to drivers who own a vehicle that’s registered in the state. Unfortunately, many agents don’t discuss the importance of protecting yourself even when you choose not to own a vehicle. Since a greater percentage of populations in cities are choosing to go car-free, having the discussion as to whether or not you need insurance is critical.

Why are millennials deciding to go car-free?

According to the statistics, about 95 percent of American households nationwide own at least one car. In some areas, especially congested cities with convenient transportation systems, this number is much lower.

One of the main reasons why the percentage of car ownership is on the decline is because millennials don’t tend to like cars much. Here are some other major reasons why car ownership is projected to be on the decline:

  • They’re less likely to get driver’s licenses
  • They take fewer car trips
  • They travel to closer destinations
  • More likely to walk, bike or take public transportation around the city
  • Rising cost of gas and parking
  • Better access to affordable ride-sharing services

When You Need to Buy Insurance Without Buying a Car

If you fit into the group of millennials that’s found a way to get around without owning a car, you still need to look over your insurance portfolio. A blank space on the auto insurance category of your portfolio could put you at risk. If you drive a car or you’ve been ordered to carry continuous coverage in court, you should really buy a non-owner auto insurance policy under your name. Here are scenarios where non-owner insurance is needed or beneficial:

  • You Rent Cars on a Regular Basis- Rental car liability protection can cost you a pretty penny. According to studies conducted by Consumer Affairs, agencies charge about $10.95 per day for Supplemental Liability Protection (SLP). If you’re renting long-term, this can add up quickly. Having your own specialty policy eliminates the need for the SLP coverage.
  • You Borrow Cars Frequently- If you’re driving a friend’s car and you cause an accident, there are scenarios where their insurer won’t pay for a filed a claim. To prevent this from happening, you can buy your own non-owner insurance and have a buffer of protection that kicks in after the primary insurer pays or rejects liability. Just be sure that you don’t drive a car owned by someone who lives in your home or your claim will be denied.
  • You Need to File Proof of Financial Responsibility- If you’ve been convicted of a major infraction like a DUI, the state may require you to carry insurance continuously. This requirement applies for as long as you have a license, even if you don’t own a car. To satisfy this requirement, you file a SR-22 with the DMV by purchasing non-owners SR-22 insurance. When you buy a car you will transition to a traditional policy.
  • You Want to Keep Continuous Insurance Discounts- Did you know that carrying auto insurance continuously saves you money off of your rates? Many states have a continuous car insurance discount or a loyalty discount that can drive your rates down. If you plan on buying a car later down the line, you should contemplate avoiding a lapse with a specialty policy.
  • You Use a Car-sharing Service- Car-sharing services are becoming very popular. While this was once an exclusion under non-owners policies, it’s now been added to some of the bigger plans as an acceptable type of vehicle usage. If you want protection while you are operating a shared car, check policy provisions and find a policy without an exclusion.

Where to Find Non-owner’s Insurance

Not all companies offer non-owners car insurance. Check first with your insurer to see if they have special plans. If they don’t, you should shop the market and find carriers well known in the specialty platform.

One way to find all of the best carriers who will provide drivers without cars insurance coverage is to use an online rate comparison tool.

Online brokerage-style tools will ask you basic questions to determine your needs and which companies will cater to them. After you’ve provided your information, you can select limits and then review the rates with each insurer. Armed with all of the information you need, invest in your protection and buy your own insurance before you borrow or rent a car. Enter your zip code in our FREE tool above to compare car insurance rates now!

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