Generally, when you take out car insurance, it is assumed that the person taking out the insurance and the owner of the car are one and the same. That means that you are taking out insurance in order to protect your own vehicle, so that any damage that you are liable for will be paid out by the company.
But what if you want to take out insurance on a car that is not your own? What if you need to insure a car that you drive regularly but that belongs to someone else?
You have several options in this case and finding the right solution is an important way to avoid paying over the odds while at the same time ensuring that you are actually protected and won’t land yourself (or the car owner!) in trouble.
Let’s take a look…
What The Law Says
In most states, there is no law saying that the car insurer and owner must be one and the same. However, just because something is legal, that does not mean that it is necessarily the done thing, or that it is going to be a walk in the park…
Unfortunately, while you are technically allowed to take out insurance on a car other than your own, this is something that certain insurers don’t like and you might find as a result that it can be hard to find policies that will allow you to do the same.
What’s more, is that some policies will let you take out the insurance (most likely because you have applied online and they haven’t asked the right questions) but will then quibble the situation when you come to claim. You need to be very careful here as you are in murky territory!
Exceptional Circumstances: Title Loans
There are some exceptional circumstances where this won’t be an issue at all. One example is if you take out a title loan. A title loan is a type of loan where you will be using an asset as collateral, meaning that if you fail to pay the loan, the lender will be entitled to claim your possession.
Of course in this case, the asset in question is the car. When you take out this type of loan, you transfer the title of your car to the lender and they will then legally own your car until you finish paying off the loan. This means that you can afford a bigger loan by getting better rates – and the lender will be happy to lend you the car for those cheaper rates because they will have a form of guarantee that they will get the money back. If you struggle to pay off the loan, they will have the option to simply sell your vehicle and use that to offset the outstanding balance!
You still need to be insured however but the title is not yours. That means that in this scenario, the insurance is for a car that doesn’t legally belong to you – but most insurance companies will be familiar with this concept and will have no problem insuring your vehicle!
The big question now is what happens if you should have an accident? The answer is that the insurers will pay out in full as usual, but they will pay the money to the lender rather than to you and that money will be used to pay off some of your loan.
How to Get Insurance for Someone Else’s Vehicle
Other scenarios where you might be thinking of getting insurance for a car other than your own might be, for instance, if you wanted to insure your child to drive their car.
But this is why insurers don’t always like you to do this. When you insure your child to drive a car but use your own name and details, you are not being forthcoming in regards to the details of the driver. The insurer needs to know that they are young, because this increases the risk from their perspective and thereby increases the cost of their insurance most often.
So with that in mind, how do you go about insuring someone else’s vehicle? What is most important here is to shop around and to find a company that openly states that it will be happy to insure someone else to drive the vehicle. You can try speaking with an insurance agent, or just calling around a few insurance companies in order to discuss the possibility.
In most cases, you will need to demonstrate an ‘insurable interest’ and this might mean that you have something to lose if the car gets totalled. An example of this might be if the car was a joint purchase and the owner only wanted to take out third party insurance. Demonstrating this insurable interest can be hard though and in many cases, you might find that companies struggle to understand why you would want to take out this kind of insurance – perhaps rightly so!
The smarter option that will be more appropriate in the vast majority of cases, is to make the other person a named driver on your insurance. Here, you will insure your vehicle but you will then add the name of the driver to your policy. They will then be allowed to drive the car as though it were their own but the insurance policy will belong to you.
In most situations, this option will cover the situation and allow you to insure a car that someone else is driving and that they can legally own. Otherwise, why not just agree to pay for the insurance for the driver and get them to agree to give you the amount that you’re entitled to should there be any kind of accident? There are always ways around the situation, just make sure that the insurance company knows as much as possible about everyone driving the car and where it will be stored etc. That way, there can be no unhappy surprises when you come to claim!