Can I Insure a Car I Don’t Own?

A driver can insure a car belonging to someone else and it may be the best option in some circumstances. If the vehicle is driven by someone else who isn’t living with the vehicle owner, it makes sense the person who drives it buys the insurance and lists the owner as “additional interest” on the policy with an endorsement. In that case, the premium is paid by the policyholder but any claim check is paid to the owner. Also, the owner is listed as a financially interested party only and doesn’t drive the car and therefore doesn’t influence the premium, which is based on the details of the policyholder.

A good example would be when someone is driving a relative’s or parent’s automobile but living at a different address. It makes sense that the insurance policy reflects where the car is kept at the moment and who drives it. Therefore, companies allow the car to be insured by the current user and clarify the fact the car is owned by someone else with an endorsement to make sure the owner gets the money if their car is damaged or totaled.

The driver may need to convince the vehicle insurer that there is a legitimate reason for wanting to insure someone else’s automobile and they will take good care of it. Nevertheless, there is hardly any chance of a moral hazard because the policyholder isn’t the person who would collect in case of damage or total loss claim.

Under normal circumstances, title holders buy coverage for their vehicles and other drivers are listed on the policy. Since they live at different locations, a vehicle owner cannot just insure the car and list the person who is actually driving it as a driver. Most companies don’t allow someone else who doesn’t live with the policyholder to be added as a driver, especially if they are in a totally different city. This causes a problem mainly because it isn’t clear which zip code the insurer should base their rates on.

Most states allow automobiles to be insured by a person who isn’t the legal owner. Some companies may agree to the owner buying a policy and adding a non-resident driver on the policy. But this would increase costs since the insurer has to rate both the owner and driver.

Another option to get coverage for driving someone else’s automobile is to buy non-owners auto insurance. However, these policies provide only liability coverage for driving someone else’s vehicle and don’t provide physical damages coverage for it.

Essentially, if the owner isn’t using and someone else is driving (or wanting to drive), it makes sense the driver would insure it at their address and pay for the premium. These sorts of arrangements are common between family members like parents and children or close relatives due to the trust factor. But they don’t need to be related for it to work.

Furthermore, there may be legal reasons why someone wants or needs to insure someone else’s automobile. Contracts like leases can place such an obligation on the person who leased it. Actually, millions of people insure cars belonging to leasing companies every day.  In that case, you need to note the interest of the leasing firm, in accordance with conditions of the lease agreement.

However, the arrangement is usually different in that leasing companies may be endorsed on the policy as “additional insured” to make sure the policy bought by the lessee covers them against anyone suing them for any fault in the vehicle or other reasons since they own the vehicle. In this case, the owner of the vehicle is insured under the policy as well as being noted as the owner and they can make a claim on the policy if they are sued.

The leasing companies are businesses and therefore they can be held responsible for any faults in the car. But the situation is different in the case of a parent letting his child use the car as they cannot easily be sued by third parties for an accident caused by the driver. The drivers are responsible for accidents even if the vehicle belongs to someone else (especially in private arrangements). Therefore, it makes sense for them to buy insurance for a car belonging to someone else, when the owner isn’t using it and has no intention of driving it.

It may be possible that the leasing company may have a separate blanket liability coverage and therefore may not need to be insured in every policy taken out by the lessees. Then, the same principle applies and they can be added as “additional interest” and doesn’t cost additional premiums. This all depends on the lease contract.

But essentially people are insuring cars belonging to the leasing company and it is a very common practice. The same principle is borrowed when people need to insure cars belonging to other private individuals.