Non-Owner Car Insurance: What is Covered? Do You Need It?

If you don’t own a car, it’s easy enough to assume you don’t need car insurance either.

That will certainly be true if you never – ever – drive a car for any reason.

However, if you do drive even a few times a year, whether it’s someone else’s vehicle or one you rent from a car rental company, non-owner car insurance can come in handy.

Anytime you get behind the wheel of a car, you have the potential liability of damaging another person’s vehicle.

Even worse:

There's the potential liability of bodily harm to other drivers and pedestrians in the event of an at-fault accident.

That’s why you’ll need to have non-owner car insurance.

And naturally, you’ll also need to comply with state auto insurance laws any time you drive for any reason.

What Non-Owner Car Insurance Covers

When you purchase non-owner car insurance, it will generally cover the liability portion of a typical auto insurance policy.

That means:

It covers injuries and property damage to another driver if you are involved in an accident that’s determined to be your fault.

Most liability coverage also offers optional provisions, even if you are a non-owner.

For example, you can add medical payments or personal injury protection coverage for medical expenses for yourself or any other occupants of the vehicle you’re driving.

Other provisions to consider

You can and should also include both uninsured and underinsured motorist liability provisions.

Either will offer protection to you if you’re involved in an accident that’s determined to be another party’s fault, and that person either has insufficient car insurance coverage or none at all.

There are other options available that you may or may not decide on.

For example, if you frequently rent cars, you should have a provision for rental car liability coverage. However, this won’t be necessary if you never rent vehicles.

But absent this coverage provision, you’ll be forced to pay for liability coverage directly from the car rental companies, which could easily run between $25 and $50 per day, in addition to the regular car rental fee.

What is Not Covered

Probably the most important limitation of non-owner car insurance is that it won’t cover damage to the vehicle you’re driving at the time you experience an at-fault accident.

Since you don’t own a vehicle yourself, you won’t be able to add collision coverage, which is the policy provision specifically designed for damage to the vehicle you’re driving in an at-fault accident.

Also missing will be comprehensive coverage.

That’s a common auto insurance policy provision that covers damage to your vehicle for events that occur while the vehicle isn’t in motion.

For example, comprehensive will cover a tree falling on your car, storm damage, or damage to your vehicle in a hit-and-run situation.

But once again, since you don’t own a vehicle, you won’t have comprehensive coverage.

Who Needs Non-Owner Car Insurance

If you’re a licensed driver, you should have non-owner car insurance even if you don’t intend to drive.

In most states, you’re required to have at least liability coverage anytime you get behind the wheel of a car – even if it’s only once or twice a year.

If you don’t have at least liability coverage, you can be held personally liable if you’re involved in an accident that’s determined to be your fault.

That is:

The other party in the accident can recover damages from you personally, and even file a lawsuit against you.

Meanwhile, if you’re ever caught operating a vehicle without having liability insurance – and you live in a state where it’s required (which is all except New Hampshire) – you can face severe civil and even criminal charges, as well as the loss of your driver’s license.

Exactly what those sanctions will be, and what the fines and other penalties might be, will depend on the auto insurance laws in the state where you’re operating a vehicle.

Put another way:

If you have any plans to operate any motor vehicle anytime or anywhere, you need to have non-owner car insurance.

Special Situations

Lapse in coverage

A common reason to not have car insurance is if you temporarily are without a vehicle.

You may reason that since you don’t own a car, and won’t be driving at all, then you don’t need car insurance.

But there’s a flaw in this thinking, and it can be costly.

If you plan to buy a car in the near future and you go for an extended period without coverage, the new insurance company will consider that you have lapsed coverage.

This will result in paying a higher premium than you otherwise would.

Car insurance companies give discounts for continuous coverage, even if it was provided by another carrier.

You’ll lose that benefit if you allow your policy to lapse for even a few months.

Driving a company car

A common reason to be a non-owner is when you have been given a car by your employer.

If so, the need for insurance will depend on the arrangement you have with your employer.

Since the car is owned by your employer, it’s likely they have an auto insurance policy in place that will cover you. But it will only apply while you drive it for business purposes.

However, if you also use the company vehicle for non-business purposes, your company’s policy won’t cover you in the event of an at-fault accident.

That’s when you will need a non-owner car insurance policy.

Driving someone else’s vehicle more than occasionally

If you don’t personally own a vehicle, but someone in your household does, and you drive that vehicle anytime you need to go somewhere, you’ll either have to get non-owner car insurance or be added to that person’s policy as an authorized driver.

But, be aware:

All car insurance policies handle non-covered drivers in their own way.

For example, one policy may cover a non-included party, while another may not. If you plan to drive a friend or family member’s car on a fairly regular basis, you should make sure they’ve investigated the terms of their policy for how an accident will be covered.

Also, if you do get into an accident under the friend or family member’s policy, his or her premium will increase as a result of your accident.

Having your own non-owner policy may protect them from this outcome.

Cost of a Non-Owner Car Insurance Policy

Since non-owner car insurance is basically the liability portion of a typical auto insurance policy, you can expect the premium to be very similar to what it would be if you didn’t own a vehicle.

However, it should be at least somewhat lower because the lack of a vehicle means you probably don’t drive very often.

Since one of the major factors in determining liability coverage is the number of miles you drive on a regular basis, you should expect a big discount for this factor.

Otherwise, your premiums will be determined by:

• the amount of coverage you need
• your personal driving history
• where you live
• other factors commonly associated with auto insurance premiums

Just as is the case with car insurance for car owners, your liability insurance should roughly approximate your net worth.

Though your state minimum liability coverage may be $50,000, you may want to get a $200,000 policy if you have a net worth of at least $200,000.

Except in extreme cases, other parties are generally unlikely to pursue you for more than the value of your policy.

But if you’re concerned that someone might go for more, you can also get an umbrella policy, which offers much higher limits at relatively low premiums.

Nationwide, the average car insurance premium is $1,517, but that varies widely by your state of residence. For example, it can be a low of $912 per year in Maine, to a high of $2,878 in Michigan.

However, for a non-owner car insurance policy, your annual premium should be substantially lower.

You won’t need collision or comprehensive coverage, which represents a large percentage of the average premium.

And again, since you probably don’t drive many miles in the course of a year, you’ll get a big discount on your liability coverage.

How to Buy Non-owner Car Insurance

You can buy non-owner car insurance from most major auto insurance companies.

That includes household names, like:

• Progressive
• GEICO
• State Farm
• Nationwide
• The General

Which you should choose will depend on the premium levels available in your state of residence.

No matter what, you’ll need to get liability coverage that meets the minimum required by law in your state.

Reading quotes

Liability insurance is usually quoted in a three-number sequence that will look something like 25/50/25.

The three numbers will represent the minimum requirements in each of three categories (in thousands):

• $25,000 for bodily injury or death of one person in a single accident
• $50,000 for bodily injury or death of two or more persons in a single accident
• $25,000 for injury to or destruction of property of others in a single accident.

If you’re purchasing non-owner car insurance, be sure to specify that to the car insurance company from which you’re getting a quote.

You’ll want to make sure that you have an adequate amount of coverage but also that you’re not paying for coverage provisions you don’t need.

Once again:

Though you’re legally required to have the minimum level of coverage in your state, you should carefully consider your net worth in making a decision about the coverage you need.

Even if you only drive occasionally, a single accident is all it will take to have your entire net worth wiped out in a single lawsuit.

Summary

As long as you’re a licensed driver, you should at least have the minimum level of liability insurance required in your state of residence.

Failure to have proper coverage could expose you to fines and penalties for driving without coverage or massive legal liabilities if you’re involved in an at-fault accident.