If you don't own a car but drive often, it may be a good idea to consider buying a "nonowners car insurance policy."
Residents of big cities frequently don't own cars,
yet many rent cars for vacations and other trips. If you rent a car,
you can purchase insurance offered by the rental company. If you
frequently rent cars, a nonowners policy might be more cost-effective
than relying on the insurance sold at rental counters.
There are other situations in which buying a
nonowners policy could be wise — like if you often borrow a car from
friends or relatives. While a standard personal car insurance policy
covers the insured and "any relative and anyone else using your car if
the use is with your permission," their liability coverage could be
low. If you got into an accident and the damage you caused exceeds your
friend's insurance liability limits, the injured party can come after
your personal assets, such as your home, to recover the rest. The same
situation could apply if you often use a company car for personal use.
A
nonowners policy focuses mainly on providing you with liability
protection. Comprehensive, collision, towing reimbursement, and rental
reimbursement and other optional coverages are not usually available
for nonowners policies. There are generally no deductibles with
nonowners car insurance, unless your state requires
uninsured/underinsured property-damage coverage. (For an explanation of
all these terms, see car insurance basics.)
Though
details vary by state, a nonowners policy will generally cost you about
half the premiums of a standard insurance policy for people who own
cars. For example, in Illinois, an average nonowners policy from State
Farm could cost you roughly $700 a year. Prices will vary by location
and depend on the level of liability limits you choose. However, you
may not be eligible for discounts (like a good-driver discount) offered
to standard policyholders, says Holly Anderson, spokesperson for State
Farm. Law enforcement personnel, car-service employees and people
operating public livery vehicles are eligible for the discount.
Your
nonowners auto insurance will cover you when you rent a vehicle and are
involved in an accident. If you borrow someone's car and crash it, the
vehicle owner's insurance pays out first, and if it's not enough to
cover damages, your nonowners policy would then pay out. For instance,
if the car owner's liability limit is $10,000 for property damage, and
you cause $17,000 worth of property damage, your insurance would cover
the last $7,000.
