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As of 2019, there were roughly 276 million registered vehicles on the road in the U.S., which means that tons of drivers were behind the wheel at any given point. To do so, most drivers need car insurance, which is a legal requirement in almost every state if you own a vehicle that is registered in your name. But do you need car insurance if you occasionally borrow someone else’s vehicle? If you drive a car that’s not in your name, you might be wondering about the insurance implications.
In most scenarios, you cannot purchase car insurance on a vehicle that is not in your name. What that means is that if you drive a friend or family member’s vehicle, or are gifted a vehicle that’s in someone else’s name, the legal owner is responsible for insuring it. However, there are specific policies that cover non-vehicle owners, and these types of policies may be worth considering if you frequently borrow vehicles from other people. Here’s what you should know.
Can you insure a car without the title being in your name?
Generally, you cannot insure a vehicle that you do not own. To fully understand that answer, you need to understand how insurance works.
Insurance is technically a financial product. Although you are “covering” your vehicle, your insurance does not prevent the damage from happening. Rather, having auto insurance coverage provides you with financial protection by helping cover the claims expenses if you are involved in an accident.
Because auto insurance will pay for damage to your vehicle, as well as damage you cause to another driver’s vehicle (depending on the type of coverage you have), you must have what is called insurable interest in the vehicle. This means that you must have a financial stake in the vehicle you insure. If the vehicle is not registered to you, you have no insurable interest in it. Therefore, you cannot insure it.
Auto insurance claims
When an auto insurance claim is paid, funds disbursed by the insurer for the vehicle’s damage are paid to the insurance policyholder. If you were permitted to insure a car you do not own, you could potentially receive money for damage to a vehicle you have no financial stake in.
Think of it this way: You borrow a friend’s car and hit a pole. If you were able to insure the car, you could file a claim under your collision insurance and be paid for the damage, even though your friend is the one with the financial stake in the vehicle — they paid for it. Because you have no financial stake in the car, you have no right to any claim payout from the insurer.
Insurance for non-owned vehicles
Now that you understand why you cannot insure a car that is not in your name, we should discuss some common situations where you might want auto insurance for a car you do not own and what you can do to get the coverage you need.
Renting a vehicle
If you are renting a vehicle, you have a few options for auto insurance coverage. If you have an auto insurance policy on another vehicle, often your coverage limits will transfer to a rental car. However, if you do not have full coverage auto insurance, which includes optional comprehensive and collision insurance, your rental car would be left without coverage for repairs if damaged. There would be no coverage if the vehicle is stolen or vandalized either.
If you don’t have your own auto insurance policy, you may want to consider buying the insurance offered by the rental company. In fact, if you cannot show proof of coverage on another car, you may be required to buy the rental company’s coverage before you can rent the vehicle.
Borrowing a car from a friend or family member
Before driving a vehicle that has been loaned to you, ask your friend or family member to talk to their insurance company. Generally, you will be covered by their auto insurance policy even if you are not listed as a regular driver on the vehicle. This is called “permissive use:” the vehicle owner and the auto insurer are permitting you to drive the vehicle temporarily, so insurance coverage extends to you while using that vehicle.
If you are using a borrowed car for an extended period, you may need to be listed as a driver on the auto policy. Additionally, the vehicle’s garaging address may need to be updated to your address so that the policy can be rated correctly. Regularly using a borrowed car — the definition of which will vary by company — and failing to notify the insurance company could result in a claim being denied for misrepresentation, so it is important to be transparent about the situation.
Being given a vehicle as a gift
Perhaps your parents or grandparents just purchased a new car and have agreed to give you their old vehicle as a gift. They may offer to keep the vehicle insured, but is that the correct way to handle the situation?
It depends on your living situation and age. If you still live in the same household as your parents (or whoever gave you the vehicle) and you are a minor, you may be able to keep the vehicle insured on your parents’ policy and add yourself as the vehicle owner.
However, if you are 18 years old, or live at a different location, you will likely need to get your own auto insurance policy. Insurance companies know that vehicle registration and insurance changes do not happen overnight, so leaving the vehicle insured on the prior owner’s policy for a few weeks might be acceptable. However, you should do your best to get an insurance policy on the vehicle in your name as soon as possible and then register and title the vehicle to you.
If you work for a company that has given you a vehicle to drive, it needs to be insured. Typically, your employer will be the owner of the vehicle, meaning that you have no insurable interest in it. You will likely be added to your employer’s business auto insurance policy as a driver. You are not expected, or able, to take out a personal auto policy on a corporate vehicle that you do not own.
However, if you own a business and purchase a company vehicle, you will need to purchase business auto insurance coverage. The vehicle will need to be insured as a business auto rather than a personal one. If your business is the registered owner of the vehicle, the insurance policy will need to be in the company’s name.