Insurance Q&A: “Can I buy insurance for someone else’s car?”
Most of us don’t enjoy buying insurance for our own property, let alone someone else’s belongings.
But the fact is it may be quite necessary to obtain insurance coverage for someone else’s car.
When Is This Necessary?
The situation above may arise every time a child is given access to drive Mom or Dad’s car. You may also be given access to a vehicle by a friend or relative.
Technically, everyone who takes out a loan or leases a car is buying insurance for someone else’s car…the bank, credit union or leasing company (loss payee).
These institutions really “own” the vehicle until it’s paid off. Don’t believe us? Stop paying the note and see how long the car sits in your driveway.
Also, purchasing rental car insurance constitutes insuring someone else’s property.
What Are The Rules?
1. You need to have permission/authorization from the property owner to obtain insurance.
Without going into too much legal detail, you cannot just go around buying insurance for other people.
2. The owner has to be the benefit of the insurance (or any other insurable interest, i.e. the bank that actually holds the note or a leasing company).
The person or entity that has financial interest, the legal owner of the property (who would lose out if the property was damaged) has to be listed on the property as the beneficiary of funds (loss payee) on the policy. You can’t take out a policy on your friend’s car and collect the money if it’s damaged…the money paid on a loss has to go to your friend or the institution who holds the note on the vehicle.
What About Liability Only Car Insurance?
A named non-owner auto insurance policy may be for you if the vehicle in question is not valuable enough to require full coverage (comprehensive and collision), isn’t being leased, or has no other additional interest.
The named non-owner policy is a liability-only policy that covers an individual who drives another person’s car from time to time. This policy comes in handy for those who regularly rent cars as well.
Note: If you are provided “regular” use of a vehicle, insurers typically demand you be listed as a driver on the policy that covers the vehicle. Regular use may be described as driving the vehicle at least once per month.