Short Term Car Insurance: Tempting Temporary Coverage

Questions Answered:

• Can I just buy a regular auto policy and cancel it when I don’t need it anymore?

• Am I covered if I borrow a friend’s car?

• Can I get insurance if I don’t own a car?

Standard car insurance, like what you’d buy from Geico or State Farm, is usually only available in increments of six months or more. But if you’re borrowing a friend’s car for a road trip or you’re home from college temporarily, you don’t want to invest in six months of insurance premiums. You also don’t want to jump behind the wheel without insurance — which would put your finances and your driver’s license at risk. And so now, you’re in search of short-term coverage or a temporary auto insurance policy.

Short-term car insurance basics

Here’s the sad truth. In the U.S., short-term car insurance isn’t widely available. Most car insurance providers simply don’t offer a two-week or even two-month policy. But that doesn’t mean you’re out of luck. There are car insurance products available that can do the job for you affordably. Read on for an overview of five types of short-term car insurance — along with how you’d use each one.

Types of short-term car insurance

1. Non-owner auto coverage

Non-owner auto coverage is liability insurance that’s attached to you as a driver. While standard auto insurance insures specific vehicles, non-owner auto insurance gives you liability protection no matter what car you drive. This is technically not a short-term policy; you still have to buy a six- or 12-month term. But non-owner insurance is inexpensive for good drivers and it will keep you from getting busted for driving without insurance.

When non-owner auto coverage is appropriate

Non-owner auto coverage is appropriate if you do not own a vehicle, but plan on driving someone else’s car regularly — or even for an extended road trip. It’s important to point out here that there’s a difference between borrowing someone’s car once and borrowing the same car often. Borrow a car once with the owner’s consent, and the owner’s insurance policy should cover you when you’re behind the wheel. But you will lose that coverage if you drive the other person’s car repeatedly. This is because insurance companies want all regular drivers listed on the policy. If you cause an accident and the insurer can prove you’ve been driving the car, the claim will probably be denied.

For that reason, you should have a non-owner policy in force if you’re driving someone else’s car. That way, you know you’re at least protected from any liability claims if you cause an accident.  

2. Standard auto coverage

Technically, you could buy a six-month policy from any auto insurer, and then cancel it after 30 days. This is not a strategy we’d recommend, however. Because the next time you try to get auto insurance, you’ll see higher rates. Insurance companies interpret an inconsistent coverage history as a red flag. And with respect to any type of insurance, red flags are expensive.

When standard auto coverage is appropriate

If you’re a college student who’s home temporarily, your parents’ auto insurer may be willing to list you as a covered driver for the summer. Contact the insurer to find out your options. If your insurer can’t or won’t make the change, consider non-owner coverage instead.

A standard policy might also be the right solution if you own a car but don’t drive it much. Rather than only holding coverage for a specific window of time, keep the car insured indefinitely with minimum coverage. Then, when you plan on driving, scale up your coverage temporarily.

3. Pay-per-mile insurance

Pay-per-mile insurance charges you based on how many miles you drive. The insurer will review the usual qualifications such as your driving record, what type of car you drive, and where you live. From that information, you’ll be assigned a per-mile rate. You’ll keep a device in your car so your mileage can be tracked. And then, your monthly bill will fluctuate according to how much you drive. If you rarely drive, a pay-per-mile plan can save you quite a bit over a traditional auto policy.

When usage-based insurance is appropriate

You normally have to own the car you’re insuring on a pay-per-mile policy. But say your car spends most of its time in the garage or in storage. Maybe you pull it out for two weeks every year to take a trip. In that case, a pay-per-mile policy would be a cheap way to get year-round coverage. This is a far better option than going without insurance for most of the year — which would leave you unprotected if your car is damaged or stolen while in storage.

4. Rental car insurance

Rental car insurance is the closest thing to a true, short-term daily car insurance policy. You can get rental car coverage by day from the rental company or from a third-party provider like Insure My Rental Car or Rental Cover. This allows you to insure a car for one day or however long your rental may be.

When rental car insurance is appropriate

If you already have liability, comprehensive, and collision insurance on your own vehicle, those coverages should transfer temporarily to your rental car. If you don’t own a car or you only have liability insurance, you’ll need to purchase additional coverage from either the rental car company or a third party. Your rental car provider will enforce this by requesting proof of insurance.

If you can’t provide proof of all three coverages, you will have to buy their insurance. Know that the daily cost of insurance from the rental company can be higher than the cost of the car. Give yourself options by shopping around and arranging for rental coverage before you arrive at the rental car counter.

5. Credit card coverage

Some Visa, Mastercard, and American Express credit cards provide free rental insurance when you use the card to pay for your rented vehicle. This is usually secondary coverage (though sometimes it's primary!), meaning it pays bills that aren’t covered by your regular auto insurance provider, or helps to step in if your primary coverage is not enough. Credit card coverage may help pay your deductible, for example, but your insurer would pay the rest of the claim.

When credit card coverage is appropriate

Credit card coverage is an appropriate form of supplemental, short-term coverage on a rental car — but it only helps you when you have existing insurance on a separate vehicle that you own. Your insurance would still provide the liability and be the first payer on comprehensive or collision claims.

If you don’t have auto insurance currently, you have to buy rental car coverage at the counter or from a third party.

When you lend your car to someone else

By now, you know what to do with a vehicle you borrow or rent, but what if you lend your car to someone else? As long as you don’t lend the car regularly to the same person, the other driver should be covered by your existing insurance.

If the same person needs to use your car more than once or twice, you have two options. You can ask your friend to get non-owner coverage. Or, see if you can list your friend as a driver on your auto policy. This is easier to do if the two of you live at the same address.

Short-term or long, don’t drive without insurance

Even if you only plan to drive for a short period of time, it’s not worth the risk to go without insurance. If you own a car, try a pay-per-mile plan which keeps your costs minimal unless you’re actually driving. Otherwise, look for non-owner coverage. Either will protect you, financially and legally, without draining your bank account.