author-img
Written by:
Prachi Singh
Contributing Writer
Prachi is an insurance writer with a master’s degree in business administration. Through her writing, she hopes to help readers make smart and informed decisions about their finances. She loves to travel and write poetry.
author
Reviewed by:
Laura Longero
reviewer icon
Executive Editor
Laura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.

Question: Do insurance companies allow you to put someone on your policy to help that person save money? My sister has bad credit and a so-so driving record, while I have excellent credit and a clean driving record.  She would like me to insure her car under my policy to get better rates, but I don’t know if I should.

Answer: Don’t do it. Placing someone’s car on your policy to save that person money is a very bad idea.  One that could get you in trouble with your car insurance company and the state.

To insure a car, most car insurance companies will require you to have an insurable interest in it. This means you would be affected financially if the car were damaged or totaled. Thus, typically, only car owners, co-owners or lienholders have an insurable interest in a vehicle and can place car insurance on it.

Some car insurance companies will allow you to insure a car you don’t own; however, you must still insure it for the right reasons. 

For instance, you may find an insurer allowing you to insure a car you don’t own if someone (parent, friend, etc.) is loaning you their vehicle long-term and you want to be responsible for its insurance. 

Even when this is allowed, the car owner must be listed on the policy. If there were a payout, the car owner (who would be the one hurt economically) would be included in the claim settlement.

An insurer doesn’t want you to insure a car in your name to obtain cheaper insurance rates for the actual car owner, who is the vehicle’s primary driver.

Purchasing insurance for your sister’s car is a misrepresentation

For example, purchasing insurance under your name for your sister’s car — because you’re able to get much lower car insurance rates due to your good credit and excellent driving record — would be considered misrepresentation, a form of insurance fraud.

Car insurance rates are calculated based on the risk posed by the vehicle’s drivers. The risk is determined based on the information given to the car insurance company about who owns the car, who drives it, the annual mileage and other important rating factors.

When you give the car insurance provider information, that makes it appear that the risks are lower than what they are – by omitting information or giving false information – you’re committing insurance fraud. 

Fraud penalties vary by state, but in many states (including New Jersey, where you live) it can lead to harsh fines and possible jail time. The insurer will normally cancel your policy and leave you to look for new coverage, now with a cancellation on your record.

If you give the insurance company all the information on the situation, the insurance company would likely raise your car insurance rates to cover the advanced risk of your sister or choose not to offer coverage for the vehicle since it isn’t your car.

If there were a valid way for you to insure your sister’s car, such as you were co-owner of the car with her, the car insurance premium would still be affected by your sister’s record because you’d still have to insure your sister as the primary driver of the vehicle.

Due to your sister’s less-than-stellar driving record and bad credit, your car insurance rates would rise once she was added to your car insurance policy. 

Here’s how to lower your car insurance rates

Instead of defrauding your car insurance company, which could lead to you losing your car insurance policy — and being reported to the state to be penalized by it — you should tell your sister it’s not an option. 

However, all is not lost for your sister. There are ways that she may be able to lower car insurance rates on her own policy, including:

  • Comparison shop around for rates. Car insurance companies’ rating systems vary dramatically. By comparing car insurance rates with multiple car insurance providers, your sister can find an insurer pricing competitively for her particular risk factors.  She may be able to save hundreds of dollars if not much more.
  • Take a driving course.  Some insurers will give a discount, typically around 5 percent, for drivers who take an accident prevention or defensive driving course. Ask the insurer before signing up for a class.
  • Low-mileage discount.  If your sister’s annual mileage is below the average, she could save money by telling her insurer and getting a discount.
  • Change coverages.  If the vehicle your sister is insuring is older, it may be time to drop comprehensive and collision coverages on it to reduce her insurance costs. (See “Is it time to drop comp and collision?“)
  • Change deductibles.  If your sister keeps comprehensive and collision coverages on her vehicle but raises her deductibles, it can save her money — if she has a way to pay the deductible after a claim. A high deductible she can’t pay is pointless.

Penny Gusner contributed to this story.

Laura Longero

Ask the Insurance Expert

Laura Longero

Executive Editor

Laura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.

John McCormick

Ask the Insurance Expert

John McCormick

Editorial Director

John is the editorial director for CarInsurance.com, Insurance.com and Insure.com. Before joining QuinStreet, John was a deputy editor at The Wall Street Journal and had been an editor and reporter at a number of other media outlets where he covered insurance, personal finance, and technology.

Leslie Kasperowicz

Ask the Insurance Expert

Leslie Kasperowicz

Managing Editor

Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at CarInsurance.com.

Nupur Gambhir

Ask the Insurance Expert

Nupur Gambhir

Managing Editor

Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.

Please Enter Valid Question. Min 50 to max 250 characters are allowed. Only (& ? , .) charcters are allowed.
Please Enter Valid Email.
Error: Security check failed
Thank You, Your message has been received. Our team of auto insurance experts typically answers questions within five working days. Note that due to the volume of questions we receive, not all may be answered. Due to technical error, please try again later.
Get quotes near you!
Please enter valid zip
author image
Contributing Writer

Prachi is an insurance writer with a master’s degree in business administration. Through her writing, she hopes to help readers make smart and informed decisions about their finances. She loves to travel and write poetry.