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Non-Owned Auto Insurance

Written by W. Lane Startin. Posted in Definitions Last Updated: 02/01/2011

What non-owned auto insurance is, who qualifies for it, and why it may be a good idea for some drivers to get it.

Sometimes it's a good idea to get auto insurance well before doing this.

What if we were to tell you it might be to your advantage to get auto insurance even if you don’t own a car? Now stay with us here, there’s a method to our madness in suggesting this. There are instances where buying auto insurance before owning a car is actually a good idea.

Many insurance companies fill this need with an auto insurance product called non-owned auto insurance. As the name implies, non-owned auto insurance is auto insurance for people who don’t own a car. It may sound contradictory, but it really isn’t.

What Exactly is Non-Owned Auto Insurance?

Non-owned auto insurance is a liability only auto insurance policy necessarily tied to a driver rather than a vehicle. Because there is no vehicle, there is no full coverage option. Also, only people who don’t own a vehicle are eligible to have non-owned auto insurance. If auto insurance company underwriters find any vehicle titled to you – even if it’s junked and on cinder blocks – your non-owned auto insurance application will likely be turned down flat.

You’ll have to insure that vehicle instead.

Since a non-owned policy follows you, it supersedes any liability coverage that would otherwise apply to the vehicle you may be driving, if any. In other words, if you drive your friend’s car, you don’t have to worry about whether your friend’s liability auto insurance coverage covers you. You have your own. Generally speaking non-owned coverage doesn’t apply to commercial auto insurance situations; that’s a whole other ball of wax entirely.

State liability limit requirements for non-owned auto insurance policies are exactly the same as they are for any other type of personal car insurance. Just because you don’t own a car doesn’t make you exempt from your state’s laws.

Sorry about that.

Good Uses For Non-Owned Auto Insurance

Giving friends and family peace of mind is all fine and good when borrowing their car. But why spend money on auto insurance when you don’t have a car, especially when many auto insurance policies cover third party drivers anyway?

Good question.

For some, that’s reason enough to stay away from non-owned auto insurance. High school and college age drivers who are still on their parent’s policy don’t need non-owned insurance either, even if they don’t have a car to call their own. However, if you’re thinking about buying a car soon and in need of establishing auto insurance history, non-owned auto insurance may be something to consider.

Most standard insurance companies require at least six continuous months of prior insurance history before they will write a policy on you, even if your prior driving history is immaculate. Until then, you have to carry a policy in a high risk or non-standard company. That means higher premiums.

However, since a non-owned policy is necessarily less expensive than a comparable traditional auto insurance policy (reason: there’s no car), it can be a cost-effective way to get the clock started on your auto insurance history sooner rather than later. It counts towards it.

Another reason to consider non-owned auto insurance is for situations such as job applications which require proof of auto insurance. It’s a quick, easy and relatively inexpensive way to fulfill that requirement without visiting a used car lot first.

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W. Lane Startin

Lane is a former insurance agent with two well-known and highly rated companies. He left the world of insurance sales to return to his first love, writing. He enjoys helping people unravel the intricacies of insurance without the bias created by working for commission. He’s a graduate of Idaho State University and by extension a long-suffering Bengals fan. Lane blogs at Car Insurance Guidebook.

Reviews (6)

  • SB

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    It seems that there is a bit of catch-22. My 18 y.o. son is on my auto insurance as an additional driver. But if he rents a Zip car, which for 18-21 y.o. has poor coverage and there is no option to buy additonal coverage.

    According to State farm, he does not qualify for additional coverage through his coverage with them unless his status is changed on our policy as a co owner, not just an additional driver. My concern is that is opens us, his parents, to additional liability if he is in an accident where others are harmed. So what are the options?

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    • Michele Wilmonen

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      Yes, you do seem to be stuck between a rock and a hard place here. Because your son is legally an adult, in most cases you can no longer be held responsible for his actions. However, with that being said, since he is on your insurance policy your insurance coverage could be considered as a secondary insurance and could end up paying for damages that he causes.

      It sounds like he needs to purchase a non-owners insurance policy that is separate from your policy to make sure he is covered for this other vehicle.

      Reply

  • Raghu S

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    Has anybody tastedsuccess finding an Insurance provider in New Jersey who writes Non-Auto Policies?

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    • Michele Griffin

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      You may want to ask an insurance agent if non-owners insurance coverage is even offered in New Jersey. If they don’t have an answer for you, contact the Division of Insurance and ask them for a lisk of companies that write this particular coverage.

      Reply

  • howard green

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    Article on non-owned auto-insurance is EXACTLY what I as a regular Rental Car Customer who dislikes the high premiums charged for Liability Coverage.

    Article does not state names of Insurance companies (top 5 or 10) which offer this type of policy. Agents say can’t have auto insurance w/o a car.

    TIA

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    • Michele Griffin

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      The insurance agents you have talked to may not sell for companies that offer this type of insurance, but I can assure you that it is out there.

      Reply

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