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How do I get insurance if I no longer have a car?


A

Question: Do you have to have insurance on a car that has been totaled and not replaced? Our insurance cancels soon and we haven’t found a new car to buy. Our agent said we should keep insurance or we will be penalized when we buy insurance for the new car. Is this true? Who will sell us insurance if we do not have a car?

Answer: No, you don’t have to keep insurance on a totaled-out vehicle. In fact, there is a type of coverage meant specifically for people in your situation.

After the insurance settlement is completed on a total loss claim, many insurers will cancel your policy, effective the day after the accident -- if you ask and don’t already have a new vehicle to transfer the coverage to.  (See “Can you cancel your policy after an accident”)

What your agent said is correct.  Without continuous car insurance coverage on you and your husband, when you get a new vehicle to insure your rates could go up due to what insurance companies see as a gap in auto coverage.

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To be considered a preferred driver, and thus be offered the best rates by most car insurance companies, you need to be continually insured with an auto insurance policy. 

Being without car insurance makes you a higher risk to many insurers due to how their rating systems are set up (those with gaps typically cancel due to non-payment, or cancel on their own after getting an insurance card and thus are higher risks to insure).  In fact, some insurance companies won’t offer you a policy unless you’ve continually had car insurance for at least six months before applying for auto insurance with them. 

The non-owners policy

The insurance industry understands that there are licensed drivers without a car to insure, but who still want car insurance coverage.  For these individuals, there is non-owners car insurance coverage offered by some auto insurance providers. 

Non-owners can be used as secondary liability coverage if you borrow a car while searching for your replacement vehicle or, depending upon the terms of your policy, may be primary liability coverage when renting a car.  For details about a non-owner policy, see “What is non-owners car insurance?

A non-owner policy is relatively cheap to obtain (typically $200 - $300 a year) because it can’t be purchased or used when you own a car.  If you obtain such a policy to cover you and your husband while you are without a vehicle, once you purchase your replacement vehicle you’d need to inform your car insurance company to transfer your policy to an owner’s policy and give the insurer the details of the car so they could calculate your new rates.

Since your agent brought up this issue about continual coverage, and you cannot keep coverage on a totaled out vehicle, you should contact your car insurance company to see if it offers a non-owner insurance policy.  If it does not, then shop around for a carrier in your area that does offer a non-owner policy, such as Progressive.

And you don’t have to stick with the same insurance company that you get a non-owners policy with.  While shopping for a new car, also shop around for how much car insurance will cost with various auto insurance providers so that you can get the cheapest car insurance rates possible for the new vehicle.  (See “Pocket $1,102 just by shopping around”)

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