Sometimes it makes sense to cancel some or all car insurance coverages. However, state laws require all drivers to carry minimum levels of coverage. And if you get into an accident and don’t have the coverages you need, it might have a serious impact on your finances. Here’s what you need to know about having car insurance in different extenuating circumstances.
When You Get Your Permit and Driver’s License
First-time drivers often get a learner’s permit before their driver’s license. If your child is getting a learner’s permit, contact your insurance agent to find out if your coverage will transfer to the new driver. Also find out if your policy will cover a driver with a learner’s permit if they drive across state lines. Insurance company guidelines and state laws vary, and in some cases, the young driver may need a separate policy. If a child’s name is on the title of a vehicle, they typically need their own policy. But if the child still lives at home and drives a parent’s automobile, a parent can add the child to their policy.
When You Don’t Own a Car or Can No Longer Drive
“If you’re not driving, you don’t need auto insurance,” Jake Mathenia, an auto service specialist with Steve Womack’s State Farm Insurance Agency in Memphis, Tennessee, told The Balance in a phone interview. However, check with your health insurance company to find out if your policy covers injuries sustained in an automobile accident. If you occasionally borrow a vehicle from a friend or family member who lives in your household, their insurance company may allow them to list you as a driver. If available in your state, you can also purchase a non-owner car insurance policy. A non-owner policy follows a named person, not a specific automobile, so it provides protection regardless of whose car you borrow. Typically, non-owner auto insurance policies only offer bodily injury liability and property damage liability coverages, with no deductible, but some insurers also offer additional coverages. Non-owner policies offer secondary coverage. If you’re at fault for an accident, the vehicle owner’s policy would pay first. If liability costs exceed the owner’s policy limits, then your non-owner policy would kick in.
When You’re Leasing a Car
A leased vehicle belongs to the leasing company, not the lessee. Usually, lessors require you to carry collision and comprehensive coverages. “You’re essentially renting a car,” Mathenia said of leasing. “They want to be sure that if something happens, the car will be restored, or have enough coverage that if the car is totaled, a policy will pay for it.” A leasing company may also require you to carry more liability coverage than required by law. Typical requirements can, for example, include a minimum of $100,000 in bodily injury coverage per person, $300,000 in bodily injury coverage per accident, and $50,000 in property damage liability coverage. When leasing a vehicle, also consider buying gap insurance. If you total a leased car, your collision coverage may only pay actual cash value, which may not always cover the remaining costs of the lease. But if you carry gap insurance, it will cover the difference.
When You’re Driving Someone Else’s Car
A standard car insurance policy covers a specific automobile. So in most cases, the owner’s auto policy will protect the vehicle if you drive it with permission. For example, you might drive a family member’s car while visiting from out of town, borrow a friend’s vehicle while yours is in the shop, or drive a friend’s car while traveling together. If you often borrow a car from someone in your household, they can probably list you as a driver on their car insurance policy. Households often include spouses and children, but they may also include roommates who share the same address. Remember, insurance company guidelines and state insurance codes vary. Always get permission before driving another person’s vehicle, and if you borrow a car often, purchase a non-owner policy for added protection.
When Your Car Breaks Down
If your car is in the shop for extensive repairs, you might consider temporarily suspending coverage. In such cases, you don’t need to continue paying for collision coverage while your vehicle is not on the road. Consider pausing comprehensive coverage only if the repair shop has adequate insurance. “Typically, body shops carry an umbrella policy, so if anything happens to your automobile while it’s in their possession, they’ll have to pay for it,” Mathenia said. In some states, you must submit an affidavit of non-use to the state to pause auto insurance coverage. If you finance or lease an automobile, you’ll need to get permission from the lienholder or lessor before pausing coverage. Avoid discontinuing coverage altogether. A gap in coverage, even for a few weeks, may result in higher rates when you buy another policy.
When You’re Away From Home
Deployed military members can often suspend auto insurance coverage. However, before suspending coverage, get permission from your lessor or lienholder, and ask your insurance agent if it will impact your rate when you reinstate coverage. Some insurers offer discounts for students who leave their car at home when they go off to college. Such programs often have age and distance restrictions, but continue to provide protection when the student occasionally drives the vehicle when they return home, such as during holidays and school breaks.
When You Can’t Afford Insurance
If you can no longer afford your car insurance coverage, first speak with your agent to find out if the company offers low-income plans. An agent can help you decide if you can discontinue some coverages, lower coverage limits, or raise your deductibles to decrease your rate. To prevent uninsured drivers, some states have implemented programs for low-income individuals. For instance, California’s Low Cost Auto Insurance Program helps income-eligible drivers purchase affordable liability coverages. The Minnesota Automobile Insurance Plan helps low-income automobile owners obtain insurance when they can’t find affordable coverage, and requires all insurance companies that write car insurance policies in Minnesota to participate in the program. Regardless of their income, state laws require all motorists to carry minimum levels of auto insurance. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning! If your car’s market value is less than your collision and comprehensive deductibles, it makes sense to discontinue those coverages. However, you must continue to carry all state-mandated insurance coverages.
