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Yes! It is possible to purchase coverage for someone else’s car under the following circumstances. First, the purchase must benefit the owner of the vehicle or there must be another insurable interest. Secondly, the purchaser must have the express permission of the owner before completing the transaction.
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Permission to use an owner’s vehicle confirms that you as a driver have an insurable interest in the car. Be advised however that in the event of a covered accident, the insurance policy that you purchased will only compensate the owner of the vehicle or their designated agent for property damage or losses.
As a licensed driver in the U.S., you are only required to obtain a minimum amount of liability coverage if you plan to take your own car or anyone else’s vehicle out on public thoroughfares. Liability insurance does not cover damages to the vehicle you are driving. That coverage comes with collision or comprehensive insurance.
If you plan to insure another person’s vehicle, make sure that you fulfill the legal requirement regarding interest before spending your money on an auto policy.
According to Legal Dictionary, the law of insurance states that an insured party must have an interest in the item that is insured.
This is true whether that item is a person, place, or thing. In other words if you’re going to insure something, you must have a financial stake or other legal interest in what you are insuring.
If you do not have a legal interest in the vehicle, the insurance policy will be declared null and void and no claims will be honored.
Reasons to Insure Someone Else’s Car
If only liability coverage is obtained, there needn’t be any concern about who will benefit from claims filed against the policy. Monies will only be paid out to victims of covered accidents. The vehicle owner would not be able to recoup damages to his car or the loss of personal property.
There are two main reasons to consider purchasing car insurance for another owner’s car. The first situation, borrowing, is described above. Whether a son is borrowing a parent’s automobile, or the borrower is a friend, coworker or other relative, the car being driven must carry insurance.
Borrowing a Car
Ideally, anyone who borrows a car from anyone else would be doing the owner a tremendous favor if that person saw fit to insure the vehicle on the owner’s behalf. That would be the case in a perfect world. Realistically it is neither practical nor particularly desirable to change insurance policies every time a different driver gets behind the wheel of an automobile.
Most auto policies cover the vehicle no matter who is driving, as long as the driver is of age, appropriately licensed and has the owner’s permission to use the car. The other driver provisions of typical auto policies cover occasional use of a vehicle. If the car is to be used by someone other than the owner on a regular basis, your insurance company should be informed.
Usually the auto insurance provider will require that the second driver be listed on the policy. This will usually mean that your premiums will go up. Your carrier might also require additional liability coverage. At this point, it might be wise to grant the regular driver of your car permission to obtain, and pay for insurance to cover your car.
Car insurance in most households is an expensive proposition. It is a responsibility most often left to the vehicle owner, even if the owner is kind enough to lend out his car from time to time. If an accident occurs, the financial responsibility or liability falls on the owner of the vehicle that was determined to be at fault, no matter who was driving at the time of the mishap.
Leased Car Insurance
The second most common reason a driver would want to insure a vehicle other than his own is in the situation of a lease or a rental. Vehicle leasing is far more common today than ever before. The practice of leasing establishes a long-term rental rate for a new car. This rate is generally far less than the payments that would be required to purchase the vehicle outright.
Automobile leasing is a win-win situation for both the lessee and the leasing company.
As prices of new vehicles have skyrocketed, the practice of leasing a car for a period of 24 to 36 months allows both parties to benefit. The leasing company makes a profit while retaining ownership of the vehicle.
The lessee buys the privilege of driving a brand new vehicle for several years at an affordable price without having to worry about depreciation or selling the car down the road. Maintenance responsibilities may be shared between the lessee and the leasing company, but the lessee is always responsible for properly insuring the leased vehicle.
Lessees of new vehicles are required to carry full coverage including collision and comprehensive coverage as well as liability. This protects the lessor’s financial interest in the vehicle and the lessee from the prospect of having to pay out-of-pocket for any damages sustained by the car during the term of the lease.
Another important insurance consideration if you lease your car is GAP insurance. According to reports filed by Edmonds, the amount your traditional insurance provider is willing to pay may be dramatically different from the balance you owe your leasing company.
GAP insurance is intended to cover the difference between the market value of a used vehicle, also known as book value, and the balance on your lease or loan obligation with the owner of the vehicle. This difference can be thousands of dollars!
GAP coverage is often required by leasing companies to make sure they are paid in full if their leased vehicle is stolen or damaged beyond repair.
Rental Car Insurance
In addition to long-term leases, there are also per diem rentals all of which require some form of automobile insurance protection. Per diem or day-to-day rentals cover cars and trucks as well as specialty vehicles used in construction or for other business purposes.
Once again, when a vehicle is properly registered and driven on a public roadway, insurance is required. Rental car companies such as Hertz, Budget, or U-haul provide basic liability coverage on the cars and light duty trucks they own and rent.
Damages to the rented vehicle itself in case of an accident are not covered by the rental agency and therefore become the financial responsibility of the renter at the time the damages occurred. Rental companies are very careful to offer damage insurance coverage to each driver that contracts to rent a car.
If a car renter declines damage protection coverage, they must sign a waiver acknowledging that they have turned down the additional coverage.
This means they will assume the financial risk if the vehicle is damaged. Per diem insurance is a huge profit center for rental car agencies because it is rarely needed or used by renters.
To Insure or Not to Insure
Whether to buy rental car insurance or not is a matter of opinion. According to U.S. News and World Report rental companies technically don’t offer insurance but rather a vehicle protection package.
U.S. News says that this vehicle protection doesn’t extend to situations where negligence is involved such as leaving the vehicle unattended with the engine running and the keys in the ignition. Some rental car situations may even be covered under the terms of your homeowner’s insurance policy, if you have extended liability protection or an umbrella policy.
In some cases, the renter’s own car insurance policy will cover damages to a rental car, especially if the car is hired temporarily to take the place of the insured’s regular vehicle while it is being repaired as the result of a covered incident.
In other cases, renter’s car insurance coverage is provided at no additional cost by the bank whose credit card is used to secure the rental. This coverage is usually associated with higher end gold, platinum, or other executive type credit card accounts.
According to CNN Travel tips, some credit cards will even pony up money to cover your deductible in case the collision or comprehensive protection you bought with the rental contract doesn’t cover the full amount of damages to the vehicle.
There are several important things to remember when you’re using a credit card to cover rental insurance. First, the rental charges have to be put on the card for the benefit to be effective. Secondly, the coverage offered by the credit card company is only intended to cover damages to the rental vehicle itself. Standard liability coverage is not part of the benefit package.
Bottom line is that each time that we purchase car insurance for another owner’s car; we are protecting both our own and the vehicle owner’s rights and interests. We effectively insure our liabilities in someone else’s car. However, it is against the law to insure the property of another if our intent is to profit from someone else’s loss.
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