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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Here's what you need to know...

  • When you test drive a vehicle that’s for sale by owner or being sold by a dealer, it’s the owner’s responsibility to insure the vehicle while it’s being inspected and operated by potential buyers
  • If you don’t own a car and you’re licensed to drive, it’s in your best interest to buy a non-owner’s car insurance policy until you buy a car
  • Having non-owner’s insurance will help you build an insurance history. The policy provides liability coverage that will pay for third-party claims made against you if you’re in an accident while you’re renting or borrowing a car
  • If you already own a vehicle, your existing car insurance plan will cover a new vehicle for a short period when you take ownership
  • All car owners must comply with their state’s auto insurance requirements before they drive their new car. Buyers who finance their purchase must also prove that they have physical damage insurance to comply with lender requirements

Not everyone needs insurance before they buy a vehicle, but if you’re licensed to drive and you borrow cars on a regular basis, having insurance can save the day.

If you’re planning to rent a car, buy a car, or your friend is lending you their extra car for a week, it’s your responsibility to research what type of insurance you need.

You can’t buy a standard car insurance policy when you don’t own a car, but you can establish an insurance history by purchasing a specialty plan called non-owner’s insurance.

As you’re choosing the best plan for you and your family, it’s all about timing. If you’re trying to navigate through the marketplace before you buy a car, here’s a guide that can help.

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What is the purpose of a non-owner’s car insurance policy?

You don’t have to own a car to be issued a license. As long as you pass your licensing exam, and you are physically able to operate a motor vehicle, you can earn your driving privilege.

When you use this driving privilege, it’s good to know that you have protection, even if you’re one of the millions of drivers in the nation who doesn’t own a car.

The rate of car ownership is dropping, but since car-free drivers often rent cars or borrow cars, companies can still market insurance policies to drivers who are at risk of getting sued after they cause damages in a car crash.

Without insurance, a car-free driver would face claims on their own.

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Are you required by law to buy insurance before you buy a car?

If you’re still trying to decide whether or not you’re financially ready to buy a car, you should familiarize yourself with insurance laws in your state.

As long as you’re not required to file an SR-22 with the state, you have no legal obligation to carry auto insurance until you buy a car.

Your coverage should include at least a minimum amount of third-party liability coverage to cover claims made by others after an accident.

It also helps to cover court costs, which can add up if you are disputed a claim made against you.

What type of coverage can you purchase when you don’t own a car?

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Every insurance company that sells non-owner’s car insurance will offer both Bodily Injury Liability and Property Damage Liability coverage.

If you live in a no-fault state, the carrier may also offer Personal Injury Protection (PIP) coverage to pay for your first-party medical benefits. Other carriers might offer add-on coverage options like:

  • Medical Payments – Pays for reasonable medical expenses regardless of who is at fault in the loss
  • Uninsured Motorist Protection – Pays for the cost to receive medical treatment if someone without insurance injures you in an accident

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Buying Insurance Before You Own a Car Can Help You Keep Premiums Low

Not only will buying insurance before you own a car protect your finances, but it can also help keep your costs for insurance down once you become a car owner.

Insurance companies use your driving history and your insurance history to determine risk and calculate your rates. If the statistics show that you’re likely to file a claim, you’ll pay more.

If you’ve had insurance before you own a car, it helps the company see if you’re a risky applicant.

Since the company can run your C.L.U.E. report to see if you’ve filed insurance claims, it’s common to receive a discount for having an established insurance record. The longer you have insurance with no lapse, the higher your discount will be.

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Are you insured when you drive someone else’s car?

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If you choose not to buy a non-owner’s policy, there’s a chance that you might be covered under the vehicle owner’s policy when you borrow a car.

This is because standard auto insurance policies will provide coverage for drivers who’ve been given permission to drive the car by the policyholder.

If you live in the home, or you’re excluded from the policy, you’re not insured to drive the borrowed car. Not being covered puts you at risk if you assume that you have primary protection to lean back on.

Make sure you ask the owner to check their insurance before you drive any car that you don’t own. When you’re renting, you should buy the supplemental rental coverage if you don’t have coverage of your own.

Is it your responsibility to insure a car when you’re test driving it?

If you’re ready to bite the bullet and buy a car, it’s important to time your insurance right. You can’t buy insurance on a car that you are interested in buying until you own it.

When you’re test driving the car or haggling with the seller, it’s the owner’s responsibility to insure the car.

If something were to happen to the car during the test drive, the owner’s insurance would more than likely pay.

The only time you’ll have an issue is if the injured party decides to pursue a claim against you as the driver and not against the seller. If you have existing insurance, it will protect you against these claims.

Know the State Law Before You Buy a Car

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Almost every state has a mandatory insurance requirement. If you live in a state where insurance is required, it’s important to review the coverage and limit requirements before you take possession of a car.

In most states, you must have at least the following:

  • Bodily Injury – Pays for third-party medical bills and related expenses when someone outside of your vehicle is injured in an accident
  • Property Damage – Pays for repairs when you hit someone and damage their property

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Are you ever required to buy more than what’s required by the state?

If you lease a car, you’re required to carry higher liability limits to satisfy your lessor’s contract requirements. In addition to liability coverage, you will be required to buy physical damage coverage when you’re leasing or financing the vehicle.

Physical damage coverage consists of:

  • Comprehensive – Pays to repair or replace your car after you have a loss caused by fire, theft, explosion, flood, wind, or other non-collision perils
  • Collision – Pays to repair or replace your car if it’s damaged when you collide with an object

Lenders and lessors require this coverage to protect the property that they own. You must add the entity as the loss payee or additional insured on your policy to ensure that the company gets paid if something happens to the car before the contract is paid off.

When do you have to show that you have insurance?

If you’re buying a car from a dealer, you will be asked to prove that you have full coverage before the finance officer can hand over the keys.

The insurance topic typically doesn’t come up until after the negotiations are complete, and the documents are signed. That’s why it’s critical to have your insurance ready before you go to the lot.

The best way to find low rates for insurance when you buy a new car is to shop around. It can help to compare premiums on several cars before you go shopping so that you know how much to budget for your insurance expense.

If you want to price shop, use your time wisely and put your information in our FREE online rate quote tool. Find the best price and get your application ready. Enter your zip code into our FREE comparison tool!