Question: I've been told that a vehicle’s title needs to be in your name to insure the car, is this true? If so, why do auto insurance companies care if the vehicle's title is in my name or someone else's name?
Answer: Yes, car insurance companies normally require you to own the car (have your name on the title) to insure it. Why do auto insurers care who holds the title to a car? It’s all about the person insuring the car has a reason to protect it.
Having insurable interest in something, such as an automobile, means you would suffer a financial loss if the item were damaged or destroyed. You have insurable interest in any property that you own. Car insurance companies want a policyholder to have insurable interest in the insured vehicle so that you are motivated to protect it.
If you don't have a financial stake in a car, auto insurers fear you may not take efforts to keep it from being in an accident or totaled out because you wouldn’t really be losing anything. You instead may be enticed to damage the vehicle if the real owner gets on your bad side because it would be their loss and not yours.
While it’s preferable for your name to be on the title and registration of the vehicle you want to insure, there are some car insurance carriers that will allow you to buy a policy for a car you don’t own but have care, custody and control of. (See “Insuring a car you don’t own”)
You will have to shop around to find such an insurer in your area. Be upfront with car insurance companies that you don’t own the car but that you have possession of it, and explain why you want to insure it. Keep in mind; most insurance companies will required you to list the actual car owner on the policy as such since that titleholder may need to be included in claim discussions if the car is totaled out.
Even though there are some auto insurance companies that permit you to insure a car you don’t own, not all states allow it.
For example, New York requires the owner of a car to register and insure it. The New York State Department of Motor Vehicles states that if an insurance policy is changed to a different name than that of the registrant, the state will consider there to be a lapse in insurance coverage on the vehicle. The DMV would then suspend both the registration on the car and the driver’s license of the registrant.
If you are driving a relative or friend’s car on a regular basis, first see if the owner can have you added to their policy as a driver to be properly covered. (See “Who can drive your car?”) This may be an easier solution than you finding your own policy for the vehicle and you could pay your portion of the insurance bill to the car owner.
If that is not possible, and you have possession of the car at all times, then comparison shop with several car insurance companies to find the one that will offer you the policy you need at the best rates. This may mean calling agents to discuss the complexity of your situation.