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In North Carolina, no insurance, no license


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Question: I purchased a non-owners policy in North Carolina. The agent I bought it from told me I shouldn’t continue to pay on the policy because I only needed it to get my driver's license, not to keep my license. So, I let the policy cancel out. Will I lose my license if the state finds out?  Could I get in trouble if I have an accident in my friend’s car? 

Answer:  Bad advice like what you received makes me cringe. Your agent may have thought he or she was helping you save money, but really has put you in a bad position – with the state and any future insurance company.

Future car insurance policies will cost more

Having an insurance policy cancel out for non-payment is never good. 

If you want to discontinue car insurance coverage because you no longer need insurance or are switching car insurance providers, then you need to go about it the right way.  You need to tell your current insurance company that you want to end your policy and go through the cancellation process.

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In the future, when you go to purchase a policy, your car insurance rates will be higher due this black mark on your record that makes you appear to be a bigger risk to pay your bills. 

Also, car insurance premium costs are typically higher for drivers who have not been continuously covered by car insurance.  You may not own a car right now, but keeping that non-owners policy in effect could have helped you find lower car insurance rates when you do buy a car and upgrade your policy.

Is insurance needed to get a license?

State laws don’t typically require you to show proof of car insurance to obtain a license (unless you are reinstating a license that has been suspended or revoked).  Many states do mandate proof of car insurance, or other authorized means of financial responsibility, to register a car. 

Your home state of North Carolina is no different in regards to proof of insurance for vehicle registration purposes, but is special in respects to what is required when one applies for a driver’s license.

If you don’t show proof of car insurance when you apply for a license in North Carolina, then a restriction will be placed on your driver’s license.  

To get your license while uninsured, the DMV examiner will require you to sign a waiver and will place a restriction stating “fleet vehicles only” on the face of your driver’s license. This restricts you to operating only fleet vehicles -- such as rental cars, company cars and dealer vehicles. 

To get the restriction taken off one must obtain a car insurance policy. If you don’t own a car, then a non-owners policy – like what you had – will do and get the restriction removed.

What your state can do to you

You avoided having the “fleet only” restriction by obtaining a non-owners policy before you applied for your license. By dropping that policy after you got your license, you’re not adhering to the intent of the state law.

I’ll give you the good news first.  I contacted the North Carolina Department of Motor Vehicles and its representative told me that the DMV will not revoke a license or your driving privilege solely because your car insurance has been canceled. 

The bad news is that representative said if you’re caught driving without insurance in your name you can be cited by law enforcement for no insurance.  This can mean a fine of up to $1,000 and three points on your driving record.

If you were to be in an accident, then your driving privilege would be revoked by the DMV for failure to deposit security by means of a car insurance policy.

What you can do now

You should compare car insurance rates and get a new non-owner’s policy.  You can get started by contacting our call center toll-free at 1-855-430-7753. We work with insurers such as Progressive and National General to provide non-owners policies.

A new non-owner’s policy will allow you to comply with state laws and -- if you keep the policy intact -- in time help erase the black mark of your policy that canceled due to non-payment.  This should help you receive better rates when you someday buy a car and upgrade to an owner’s policy.

You mentioned that you drive your friend’s vehicle. If you’re just borrowing the vehicle from time to time, you should be covered under the car owner’s car insurance policy as a permissive user.  If you have a non-owner’s policy, it would be secondary to this coverage.

Keep in mind that non-owner car insurance can be quite restrictive.  So you will need answer questions by an insurer on things -- such as how often you drive other people’s cars and if there are any vehicles at your residence -- to make sure you are eligible for a non-owner policy.

If you drive your friend’s vehicle on a frequent basis, then you may be required to be added to the policy as an occasional or listed driver and be unable to get a non-owner’s policy.

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