Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 14, 2021

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In a nutshell...

  • As a vehicle owner, you are generally responsible for insuring your own vehicle
  • In order to open an insurance policy, you must have insurable interest in the vehicle
  • If you live with someone who drives a vehicle you insure, you can add that person to your policy as a driver
  • The person who opens an insurance policy does not need to be the person who pays the bills; you can work out your own payment arrangements with the car’s owner

Carrying up-to-date car insurance is one of the responsibilities that come with car ownership. In general, if you are the registered owner of a vehicle, you will be responsible for purchasing insurance coverage.

However, there are a few situations where someone else might carry insurance on your vehicle.

Make sure you have the coverage you need in place at the right price. Use our free rate comparison tool today to find the best deal on car insurance.

Young Drivers and Car Insurance

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One of the most common scenarios where a person’s car is insured by someone else is when that person is a dependent of the policyholder. If you are a teenager living at home or a college student living in a dorm, your parents can cover your car insurance expenses.

Unlike health insurance, there is no upper limit to the age of a driver who can be covered by his or her parent’s insurance.

If you live with someone, that person may have access to your vehicle and vice versa. In these cases, some insurance companies will require you to list the other driver in the household on your policy.

Additionally, you may work out an arrangement with the other party where you cover the costs of insurance without carrying the policy in your name.

For example, your girlfriend may own a vehicle and have the policy listed in her name, but you can arrange for the premiums to withdraw from your bank account instead of hers.

You will want to discuss this with your insurance company to make sure that it is allowable.

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Car-Sharing Scenarios

Car-sharing and ride-sharing services have become increasingly popular, but they can be difficult from an insurance perspective.

Many insurance companies will not cover ride-sharing scenarios under their standard policy coverage.

However, insurance companies may offer specialty insurance policies for shared vehicles.

You can shop around to find a company that specializes in car sharing or ask your current insurance company whether a different policy might be available that would cover a shared vehicle.

Financial Interest and Auto Insurance

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Most insurance companies will require you to hold what they call insurable interest in a vehicle. In other words, damage to the vehicle would cause you to suffer financial loss. This is put in place to avoid fraud.

To understand this idea, consider a scenario where you take out an auto insurance policy on your neighbor’s car. If something happened to damage that vehicle, the insurance policy would pay you as the policyholder.

However, you might wish to take that money and spend it on a vacation rather than repairing the vehicle.

Your neighbor, who has a financial interest in the repairs, would suffer the loss of a vehicle with no right to compensation.

Different insurance companies may have different requirements and definitions for insurable interest. It’s worth shopping around among multiple companies to find a good fit for your needs, especially if you require special arrangements.

Misrepresentation and Insurance Rates

Having an insurable interest in a vehicle makes sense when you’re considering first-party coverages that will pay for damage to the vehicle in question.

When it comes to liability coverage, insurance companies have a different rationale for why a driver should have his or her own policy.

As you probably know from comparison shopping for car insurance, rates can vary quite a bit between companies and also from one driver to the next.

Insurance companies value your liability coverage based on risk assessment.

In other words, high-risk drivers are considered more likely to cause accidents, leading to higher insurance premiums.

Therefore, insuring someone else’s vehicle can be viewed as a type of fraud due to misrepresentation of risk.

If you take out an insurance policy based on your own driving history and allow a more high-risk driver to use the vehicle, your insurance company may deny any claims that arise or drop your policy altogether.

There may be a way to reduce your insurance costs through comparison shopping for a better deal, allowing you to save money without putting yourself at risk by letting someone else carry insurance on your car.

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