You may find yourself in a situation where temporary car insurance sounds like a much better plan than committing to a standard, long-term policy. For example, perhaps you and your friends have decided to go on a road trip where you will share driving responsibilities. Or perhaps, after a long time in storage, you have decided to take your old car out for a spin. In these cases, signing up for a standard auto policy may seem excessive to meet your state’s legal insurance requirements.
But beware of companies that advertise daily, monthly, or other short-term car insurance policies because short-term car insurance is generally unavailable in any state. However, other insurance options can get you on the road without violating insurance requirements or exposing you to excess risk.
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Does Short-Term or Temporary Car Insurance Exist?
Short-term or temporary car insurance is not something you can generally purchase because most insurers sell plans that offer 6 months of coverage or more. Even if you saw a short-term policy advertised, you will likely find that the policy being sold is actually a 6-month policy. However, the plan may allow policyholders to cancel coverage at any time for a substantial fee.
Selling short-term policies exposes insurance companies to more financial risk than standard-length insurance. For example, with a 6-month policy, you make regular payments for the entire 6 months of coverage. Even if you terminate your policy early, you may pay a penalty that makes up for it. This guarantees the insurance company gets the funds it needs to fund its operations and settle claims. Without these regular payments, it would be difficult for insurers to maintain solvency.
Beware of Short Term Auto Insurance Claims
You may see ads claiming you can get short-term or daily car insurance. However, these are most likely either scams or lead you into buying what ends up being a standard 6-month policy anyway.
If you encounter an offer for short-term or temporary auto insurance, the first thing to do is double-check where the company is located. While some countries, such as England, offer short-term car insurance policies, most U.S.-based insurers do not. The next thing to do is to check the company’s reputation. Look into customer reviews and ratings, and see if complaints have been filed against the insurer.
Finally, look into the terms and conditions of the plan to ensure you are not being sold a standard 6-month plan with hefty fines should you cancel coverage prematurely. If this is the case, you may be better served with finding an alternative means of car insurance that will give you the coverage you need for a better price, such as non-owners car insurance, limited use coverage, rental car insurance, or adding yourself as an authorized driver to someone else’s auto policy.
Your Best Options for Temporary Auto Insurance Coverage
If you do not want to commit to a typical, long-term policy, you still have some options. Generally speaking, you should be able to find insurance that fits your needs, even if you only drive temporarily or on a limited basis.
Non-owners Car Insurance
Non-owner car insurance provides coverage when driving a car you do not own. For example, suppose you have to borrow a vehicle from a friend, or travel often and drive other peoples’ cars when you are in town. In that case, you could take advantage of non-owner insurance. You can typically purchase a non-owner insurance policy for 6 or 12 months. Keep in mind that shorter policies likely come with higher premiums to reduce the risks the insurance company assumes.
This may also be a good option if you know you’re moving to an area where you will not need to have your own vehicle full time. For example, suppose you’re moving to a different country with a robust public transportation system, and you’ve sold your car. You could purchase a non-owner insurance policy while borrowing someone else’s car in the months leading up to your move.
Limited Use Coverage
With limited-use coverage, you pay based on how much you drive. For example, you may pay a set base rate that’s relatively inexpensive compared to standard auto insurance. Using geo-tracking technology, your insurance company will determine how much you drive and charge you according to how many miles you travel in a given period. Another option is pay-per-mile insurance, where you pay a lower base premium based on an estimate of how much you will drive each year.
Limited-use insurance may be a good option for those who do not drive much, but still drive semi-regularly. Because you only pay a relatively small base fee, you can save every month you do little to no driving.
Rental Car Insurance
Whenever you rent a car, the car rental company usually includes the state’s minimum liability insurance coverage in the cost. This means even if you do not have a personal auto insurance policy, you will still have car insurance coverage while renting the car. In fact, having your own auto insurance policy is not required to rent a car. Most rental companies also offer additional insurance coverage options for those who want more comprehensive protection while renting the car.
Adding Yourself to Someone Else’s Standard Auto Policy
In many cases, a driver can add you to their existing policy if you frequently drive their vehicle. For example, your roommate or spouse may add you to their policy if you share cars often. To add you as a driver, the original policyholder would contact their insurance company and provide them with your details, such as your name and driver’s license information. The insurer would then look at your driving records to assess your risk profile. After added to the policy, you will have the same coverage as the policyholder for that car.
When You Don’t Need Car Insurance
There are some situations in which you can drive a car without purchasing a separate insurance policy:
- You only occasionally drive someone else’s car. In this case, the vehicle’s owner must confirm that their coverage allows “permissive use.” If so, their verbal permission to drive their car will automatically extend coverage to you when you drive it. Keep in mind that this is for infrequent usage. If you regularly borrow someone’s car, it would be a better long-term solution to get added as an additional driver to their auto insurance policy.
- You rent a car and buy insurance from the rental agency. As mentioned before, basic liability insurance coverage is included when you rent a car. However, you can also choose to purchase additional coverage for the duration of your rental. You do not need to have your own car insurance policy before renting a car.
Why It’s a Bad Idea to Cancel Your Car Insurance Policy Early
Because short-term car insurance is not generally available, you may be tempted to buy a standard policy and cancel it early. However, canceling your car insurance policy early is a bad idea.
In addition to the hefty termination fees that the insurance company may levy for early cancellation, the cancellation record could increase your future insurance rates. Those who go without car insurance coverage for extended periods often pay significantly higher fees once they decide to purchase insurance again, as the coverage gap could be interpreted as high risk. Insurers can also see your coverage history. Those who often terminate their policies early could be charged more or denied coverage altogether.
If you cancel your insurance policy early and keep driving, you may be subject to significant fines and penalties. For example, you may end up getting your license suspended for breaking the law. In addition, if you get into an accident, you won’t have the financial protection of an active insurance policy, leaving you to pay for damages out of pocket.
Make Sure You Meet Your State’s Car Insurance Requirements
Insurance is mandatory in most states because accidents happen. Without insurance, any incident can significantly impact your finances because of medical bills and repair bills. Every state in the U.S. except for New Hampshire and Virginia has minimum liability insurance requirements for all drivers. Even drivers in New Hampshire and Virginia must carry proof that they can pay for damages if they are at fault in an accident.
No matter how infrequently you may drive, those caught driving without insurance can face stiff fines, license suspensions, or vehicle impoundment. In some cases, uninsured drivers could also face jail time. All drivers should check with their state’s Department of Insurance for their local minimum insurance requirements.