There’s a simple rule of thumb in the auto insurance industry to help determine if your car is covered in an accident: Insurance follows the vehicle, not the individual.
In other words, it doesn’t matter who bought the policy — a parent, brother or a student driver — the coverage is for the vehicle it was bought for and doesn’t follow an individual driver to another car. If your dad owns a Buick and insures it, anyone in the household who drives it is insured.
However, if your car isn’t insured and your dad drives it, the insurance he bought for his Buick won’t transfer to your car if he drives it and gets in an accident. The insurance only follows the vehicle.
But there’s an exception to the rule: Non-owner car insurance. It’s an insurance policy that moves with the policyholder to a car they borrow from time to time.
What it covers
For someone who doesn’t own a vehicle but drives a vehicle belonging to someone else — such as a family member’s or friend’s car once in awhile — a non-owner policy protects them instead of a particular vehicle with bodily injury liability coverage. The policy follows them as a driver and can be used on multiple cars that they may drive.
The non-owner auto insurance policy doesn’t cover physical damage to the borrowed car, says Spencer Ruyle, a State Farm insurance agent in Jefferson City, Missouri. The car’s owner must provide their own coverage for any physical damage to their car while someone else is driving it, such as through general liability, comprehensive and collision coverage.
The bodily injury liability coverage from a non-owner policy only takes effect after the original policy by the car’s owner pays out, Ruyle says. For example, if the car owner’s policy has $100,000 in medical coverage and $200,000 in medical bills result after a crash by a non-owner driver, then the owner’s policy would pay the first $100,000 and the secondary policy would pay the remainder if it had $100,000 or more in coverage.
The non-driver policy is meant to protect the assets of the person who borrows the car if they get into an accident and hurt someone, Ruyle says.
In Missouri, for example, a driver who doesn’t have insurance to pay for a victim’s injuries can have up to 25 percent of their wages garnished for up to 10 years, he says.
Along with protecting your assets if you’re the at-fault driver, non-driver liability insurance can provide, for free, an attorney to represent an at-fault driver if a lawsuit is filed because of an accident, says Paul J. Pimentel, a personal injury lawyer in Fresno, California.
Another reason to have non-driver insurance, Pimentel says, is if you get in an accident with someone who doesn’t have insurance or has the minimum insurance required by law, you can make a claim against your own policy. Or you can file a claim if your policy limits are greater than the at-fault driver.
“In other words, your policy will cover your injuries, wage loss, medical bills and pain and suffering,” he says.
Depending on the type of policy, your medical expenses or personal injuries could be covered if you’re struck as a pedestrian, says Dallas Norton, a lawyer in Colorado who has represented injured clients.
“Non-owner operator insurance may also supplement the insurance on a vehicle you are driving or even riding in as a passenger,” Norton says.
Policies can also provide medical expense or personal injury coverage for relatives in your household, including your children if they’re injured in someone else’s vehicle, he says.
If you live with a non-relative, you might also consider adding them onto your auto insurance policy. Some insurance companies will not cover damage if your roommate uses your car regularly. Adding them to your policy may or may not increase your premium. That most likely will depend on the roommate’s driving record.
Meet SR-22 requirement
Non-owner insurance can also be used to meet the SR-22 requirement if you don’t own a car.
An SR-22 is a state-mandated certificate that proves you have car insurance that’s required to reinstate a license after a suspension, such as losing a license for not having auto insurance. SR-22 isn’t a type of insurance policy, but is an official filing that’s a condition of keeping a driver’s license valid.
An insurer will monitor your driver’s insurance status if you’re required to file an SR-22, and will check for coverage lapses. Each state has its own guidelines on how long an auto insurance policy must be maintained with an SR-22, with severe violations such as a DUI often requiring three years of filing.
Most states mandate SR-22 filing after a license suspension, though New York and Pennsylvania are among eight states that don’t. However, moving from such a state to a state that has SR-22 laws would require filing one.
Who needs this coverage
Family members are most likely to need non-owned insurance, such as for driving a parent’s car. It can also be used when renting a car or driving a company car. Or it could be for something as simple as relieving a tired driver on a road trip, driving an intoxicated friend home, or you need a car in an emergency.
Students, foreign nationals who don’t own a car and people without much money often need non-owner policies to protect their assets if they get in an accident where people are injured, Ruyle says.
It’s also a good policy for a non-owner to have because it can be used to show an insurer they have continuous insurance coverage, which can lead to a lower insurance rate when they do buy a car, he says. Not having had any auto insurance — even for as little as six months — can make a policy more expensive when a non-owner does buy a car, Ruyle says.
A non-owner policy would also be needed when the owner of the borrowed car doesn’t have any auto insurance at all, he says. The non-owner’s policy would still only offer bodily injury liability, but only when the non-owner is driving the vehicle, and the coverage would pay out first because the owner doesn’t have insurance.
Cost of non-owner insurance
The good news is that a non-owner auto policy is comparable in price to a liability only policy, Ruyle says.
Prices range from $50 to $300 a year, depending on a person’s driving record, ZIP code and amount of liability coverage, says Jordan Perch, an auto insurance expert at DMV.com, which isn’t affiliated with any government agencies.
For someone who can’t afford a full auto insurance policy, but still needs to drive a friend’s car, a non-owner policy can protect them if they get into an accident.
“When times get tough, one of the first bills to go is car insurance,” Ruyle says.
Even for drivers who have difficulty getting auto insurance, such as SR-22 filers who have had their license suspended, a non-owner insurance policy can be a wise purchase. It allows them to continue driving while offering liability protection that could save them from financial ruin if they’re in an accident in a borrowed car.
Aaron Crowe is a freelance journalist who covers the auto industry and personal finance topics for a variety of websites, including at his website CashSmarter.com.