Getting insurance on a car you do not own or that is not registered in your name can be tricky. While most drivers insure a car owned by them, in some cases, you may need to buy car insurance on a vehicle that isn’t yours. For example, if a parent buys a new car and passes their older vehicle to a child, he/she will still need to get their own insurance for it, especially if they don’t live together. And although the simple answer is yes, you can insure a car that’s in someone else’s name, the actual process of applying for a policy is more nuanced. This is because insurance companies look to see if you have what’s known as “insurable interest” in the vehicle.
Below, we’ll explain everything you need to know about insuring a car you don’t own, and how to go about putting someone else’s car on your insurance policy.
- 1 Insure A Car Not In Your Name
- 2 Can Someone Else Insure My Financed Car?
- 3 How To Get Car Insurance For Someone Else’s Car
- 4 Insure A Car You Don’t Own
Insure A Car Not In Your Name
When insuring a car you don’t own, the main issue comes down to “insurable interest”. When you get car insurance on a vehicle you own, your financial interest is clear – you have a vested interest in the well-being of the car. This essentially means your interests and the insurer’s interests are aligned, so they trust you to take care of the vehicle and avoid accidents that may result in claims and payouts.
However, when you are not the owner of the car and the vehicle is not registered to you, the interest is not clear and must be established. After all, if you don’t have a financial investment in the car and it’s involved in a crash, you don’t stand to be liable for anything or lose any money.
For families where parents are gifting an old car to their kid who still lives at the same address, the simple solution is to just add the child as a driver on the policy. Nevertheless, in the event of an accident, liability ultimately falls on the registered owner, not the listed driver.
Otherwise, if the young adult lives at a separate address, parents may need to get the car co-titled. This can be easy to do if the vehicle is paid off, and simply requires a trip to the DMV where you will add the new driver to the car’s title. If there’s a loan on the vehicle, you may need approval from the lender or finance company.
State Laws May Stop You From Insuring a Car You Do Not Own
In specific states, like New York, registration and car insurance must be in the same name. For instance, New York requires you to have insurance when you register a vehicle in the state. Unfortunately, New York’s insurance laws also explicitly state that the name on the policy must match the name on the title and registration. Failure to match can result in the suspension of the car’s registration, meaning you can’t drive it without facing fines and penalties.
Ultimately, in the majority of states, the car title holder (owner) and named insured aren’t required to be the same person. This means it’s legally possible to take out an insurance policy on a car you don’t own. However, just because most states allow a non-owner to insure a vehicle doesn’t mean insurance companies support this action.
Car Insurance Companies May Not Pay Out Claims
Because many insurers leverage online applications to establish a new policy, it’s possible to only encounter a problem after filing a claim. Unless the online enrollment form requires owner-specific information, a policy may be established, but based on insurer policy regulations, may not be honored if the named insured differs from the vehicle’s registration. Prevent this unsavory scenario by confirming non-owner coverage restrictions before paying for a new policy.
Can Someone Else Insure My Financed Car?
One of the biggest questions you may have right now is whether someone else can insure your financed car. Until a vehicle loan is fully paid, its title belongs to the lender. Legally, it’s generally acceptable for someone else to insure your car, but the process becomes difficult when the vehicle is still being financed. Because the driver doesn’t hold insurable interest in the car, it’s considered risky in the eyes of both the insurer and finance company. You will likely have to contact your auto loan company and find out if they would allow you to get insurance under your name.
This is because the finance company, or lien holder, usually requires the insurance policyholder be the same person who is responsible for paying back the loan. Since the lender claims the car as an asset until all payments are satisfied, the lien holder often requires acceptable proof of insurance under the name of the borrower.
In this situation, it’s possible for someone else to insure your financed car as a principle operator. While you’ll remain the primary policyholder, an authorized principle operator (or listed driver) will be covered under the policy.
It’s important to note that you will be responsible for ensuring premium payments are made, although in this case, the principle operator will be paying on your behalf or repaying you directly. Moreover, the primary policyholder is ultimately responsible for any losses that may occur if the vehicle is totaled or damaged.
How To Get Car Insurance For Someone Else’s Car
To establish a policy for someone else’s vehicle, you must first check with your insurance company. Even in states where this is allowed, some insurers may not allow the policyholder name to be different from the owner. However, there are several exceptions to this rule.
Parents and employers are typically allowed to establish policies for someone else. Keep in mind, buying a policy for someone else’s car often comes with higher monthly premiums than a traditional owner-based policy.
There are two ways to get insurance for someone else’s vehicle. These include:
- getting non-owner car insurance coverage
- buying a standard auto insurance policy
Non-Owner Car Insurance
Non-owner insurance is a unique policy option specifically designed for those who occasionally drive someone else’s vehicle and don’t have a car of their own. Typically, non-owner insurance offers liability coverage only, and policies rarely cover your own vehicle. For example, if you damage your car in an accident where you are at-fault, hit an animal while driving, or suffer losses from theft, vandalism, fire or other natural disasters, these claims aren’t covered by a non-owner plan.
The Car Owner Adds You To Their Insurance
The only exception is if the vehicle owner adds your name to their existing policy. To qualify for non-owner insurance, you cannot share the same address as the title holder and you cannot be the primary driver or operator of the vehicle.
Buying Standard Insurance Coverage
Purchasing a standard car insurance policy for someone else’s vehicle is more difficult than adding your name to an existing policy or establishing non-owner coverage. While requirements vary based on insurance provider, most insurers require proof of insurable interest.
Essentially, this documentation must prove financial loss if the vehicle is damaged. The International Risk Management Institute defines insurable interest as an official document demonstrating legal or financial risk. Unless the vehicle is registered in your name, meeting this requirement is often very challenging.
Insure A Car You Don’t Own
Insuring a car you don’t own and that isn’t in your name isn’t as straightforward as a traditional auto insurance policy. While non-owner insurance is common, its liability-only coverage may not be robust enough for all drivers.
Regardless of your situation, always confirm the legalities, limitations and covered claims with the insurance provider. Failure to perform this necessary due-diligence may result in significant financial loss, or worse, being charged with insurance fraud.
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