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Do I Need Car Insurance If I Don’t Own a Car?

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Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency...

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Reviewed byJoel Ohman
Founder, CFP®

UPDATED: Mar 13, 2020

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Insurance Q&A: “Do I need car insurance if I don’t own a car?”

Well, like all things in the insurance realm, yes and no.  Individual circumstances will determine whether or not you’ll have the need for an auto insurance policy and what type of coverage to buy.

The answer also depends on your personal financial situation and risk appetite.

It is generally a good idea to have a car insurance policy in place if you don’t own a car but drive regularly.

Sure, you may have some coverage while operating another person’s car, but your personal circumstances might mean you need a named non-owner insurance policy.

This particular type of policy is referred to as secondary coverage.  In other words, if you cause an accident, the policy covering the car you borrowed will be enacted, or triggered, first.

But imagine if the car you borrowed has low liability limits and you severely injure and/or even kill somebody?  You would be financially responsible for money awarded to the victim above the limits of the policy in force on the car!

With no additional insurance, you could be paying for the accident for the rest of your life.

Additionally, what would happen if you borrow a car that has no insurance coverage or carries restricted or limited coverage and you get into an accident?  The outcome could be the same as discussed above.  You are personally responsible for ALL damages awarded to the injured party.

Most states require minimum car insurance for those of us who own an automobile. This is essentially liability-only car insurance, which protects other motorists, not you.

Check out who is covered under a typical car insurance policy and when you are not covered in the case of an accident.

Policies that have physical damage coverage also cover anyone in the above referenced situations.

Be sure to contact an insurance company or an insurance agent to discuss your personal circumstances if you are not certain whether or not you need insurance.

If you decide to get a policy, be sure to obtain multiple online quotes to ensure you’re getting a good deal.

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