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CAR Insurance
CAR INSURANCE INSIGHTS

You may need short-term coverage for a trip or occasional coverage for a weekend cruiser or rentals. Here are your options.

A car insurance policy with a toy car

If you need to insure a car or other vehicle for a short amount of time, you may be tempted by ads for short term insurance floating around on the internet. Temporary car insurance is usually sought after when a driver is seeking insurance for a short amount of time. But, is there such a thing as temporary car insurance?

Unfortunately, temporary car insurance is not available in the U.S. (apparently, it’s pretty big in the U.K.), but there are a few solutions that might give you the coverage you need for the short amount of time you need to be covered.

Keep reading to learn everything you need to know about temporary car insurance. 

Most insurance companies don’t sell temporary auto insurance

The truth is that most major insurance companies do not sell temporary car insurance. Most insurers only offer two policy term lengths, six months and 12 months. While you can usually choose between monthly car insurance payments or paying the entire premium upfront, the coverage term is still six or 12 months. In the world of car insurance, a 12-month policy is pretty standard.

There are a few reasons most insurers don't offer temporary car insurance:

  • It doesn’t make financial sense: Insurers make money by collecting more in premiums than they pay out in claims. In situations where they are only collecting a few months of premiums they would struggle to cover their administrative costs, much less the cost of a claim if you are in an accident.
  • Long term customers are best: insurers like customers that renew their policy and stay with them for several years; this way, they can hopefully collect years of premiums before having to pay out on a claim. Someone looking for short term coverage is more than likely not going to turn into a long-time customer.
  • Presents a bigger risk: Short term policyholders are a more significant risk. There is always the risk a short-term policyholder may only be looking for a claim payout or is looking to commit insurance fraud. Even if they have a legitimate reason for needing a short-term policy, they are considered a bigger risk.

Why are there ads for short term insurance?

While most major insurance companies don’t sell temporary insurance, it doesn’t mean you can’t find advertisements for a short-term policy; in some states, it is relatively common to see ads come up for temporary car insurance.

Michigan is a great example. Michigan has the highest car insurance rates in the country, mainly due to a unique no-fault system that requires all drivers to carry Personal Injury Protection (PIP).

Unfortunately, due to the high cost of car insurance, many drivers hit the road without it; in fact, Michigan has the fourth-highest level of uninsured drivers in the country, with 20.3% of drivers out on the road without coverage.

Drivers must prove they have insurance coverage when registering a car, which led to the birth (and death) of the 7-day policy in Michigan. These policies were banned in 2018 but existed for years in the Wolverine State.

The legal reason these policies were created was to provide drivers “more time to shop around for a policy,” but drivers mainly used them to prove they had insurance when registering a car. After gaining their registration, many drivers would not renew their insurance policy and were then driving around uninsured.

In most other cases, ads for temporary coverage will lead you to a regular agent who will steer you into a six-month policy because temporary car insurance USA is not available.

How to get temporary car insurance

If you have a temporary need for car insurance, your only real option is to buy a six-month policy and then cancel when you no longer need it. In most cases, you can pay month-to-month car insurance premiums, or if you prepay a policy, your insurer should refund the balance when you cancel.

In most cases, car insurance companies do not charge cancellation fees and are happy to refund your premium's unused balance.

How much is temporary car insurance?

Temporary car insurance doesn’t exist in the U.S., so the cost of “temporary car insurance” is the same as a standard six-month policy. Insurers consider several factors when setting a premium, so pricing will vary depending on your specific factors. Here are just a few data points insurers will look at:

  • Car year, make and model
  • Your driving record, age and marital status
  • Your credit record
  • Where the vehicle is kept
  • Any other drivers who will operate the vehicle

The national annual average for car insurance is $1,517, which means a six-month policy would cost around $758, on average. A six-month policy just means you are only covered for six months and if you need to continue insurance after the six-month period, the insurer will reassess your rates and write a new policy.

Pay-per-mile insurance vs. temporary insurance

While pay-per-mile policies are not designed for short term situations, if you are looking for temporary car insurance because you don’t drive much anymore or are looking to save money, a pay-per-mile policy may work.

"Pay-per-mile policies are a way for insurers to seek out lower-risk drivers. They work will for the consumer, too, because they're simple, straight-forward and offer the opportunity to save some money on car insurance", says Michelle Megna, editorial director for Insurance.com. 

Usage-based insurance bases your month-to-month car insurance premium on how much you drive, and if you are not out on the road a lot anymore, the savings can be dramatic.

Instead of temporary insurance, ask about an insurance adjustment

While temporary insurance policies are not usually an option, some situations may require adjustments to your car insurance policies. Here are a few of the more common ones and how to deal with them:

Coverage for a weekend cruiser or collectible car

If you are a daily driver and own a car that is only used occasionally or seasonally, you may be able to save some money on insurance.

Many insurers will allow you to add and drop extra cars as needed to your policy (online or by phone) so that you’re not stuck insuring a car year-round that you drive only occasionally.

A convertible that sits in the garage all winter is a perfect candidate. Drop your coverage over winter and put the extra money into a plane ticket to somewhere warm.

Keep in mind that most states require any registered vehicle to have liability coverage. If you take liability coverage off a car, you’ll also need to turn in your registration and plates.

A limited use policy can be an option for collector or antique cars. These policies insure the vehicle year-round, but you must keep the annual mileage under a certain cap. The mileage cap can vary, but 2,000 to 4,000 miles a year is typical. If you exceed the mile, your claim may be denied. With this policy type, you don’t have to start and stop coverage but carry it continuously for reasonably cheap rates.

Needing to add a person to your car insurance temporarily

If you lend your car out to a friend or roommate once in a while, there is no need to add them to your car insurance as they are covered by your policy, which allows permissive use of your vehicle.

However, if your babysitter, nanny, or even an elderly parent drives your vehicle regularly, you should consider adding them to your policy. Check with your agent regarding your specific situation for their recommendation.

If you need to add a driver to your policy, you should have the following information handy:

  • Name
  • Date of birth
  • Gender
  • Social Security number
  • Driver license number
  • Details of any recent traffic tickets or accidents

Short-term use of a car you will resell

If you buy a car that you plan to use for a short period and then resell, you should be able to get by with a standard car insurance policy. As an example, say you’re buying a car to go on a two-month road trip with your friends and plan to sell the vehicle when you return. While you may only need coverage for a couple of months, short term car insurance policies aren’t sold in that manner in the U.S., so you’ll have to buy a policy for the shortest period possible, six months normally, and then cancel it once you’ve sold the car.

When you cancel a policy, you absolutely must inform the insurance company – don’t let it cancel for nonpayment as there may be cancellation fees. It can impact your ability to get insurance in the future. If you paid upfront for the policy, you might be due a partial refund when you cancel it.

You don't own a car but rent one, occasionally

If you don’t own a car (or have car insurance) but rent vehicles now and again, you will need some type of rental car insurance. Without your own car insurance policy to fall back on, you won’t be covered for liability unless you buy rental car insurance coverage at the rental counter or liability is included in the rental car cost, which is a requirement in some states. 

In this situation, your options are to purchase coverage from the rental agency or consider a non-owner policy. For rental coverage, the best deal will most likely depend on how often you rent. If you are only renting a vehicle once a year for a few days, paying the rental agency for coverage is probably the best answer. Insurance from a rental car agency is a type of temporary or short-term car insurance policy, but it usually is pretty costly, as much as $15 a day.

If you rent a car frequently you may want to consider a non-owner car insurance policy. Non-owner car insurance allows someone who doesn’t own a car to obtain a liability policy that acts as secondary coverage when borrowing a friend’s car or primary liability coverage for rental vehicles (not all non-owner policies extend to rental cars, so check the fine print). It is relatively cheap compared to an owner’s policy and much more convenient than buying liability coverage at the counter.

A non-owner policy does not include collision or comprehensive, so it won’t help you if the rental car is damaged or stolen. Before you buy a temporary collision damage waiver from the rental agency, check your credit card benefits. Some credit card companies offer secondary rental collision damage coverage as a perk if you use the credit card for the rental vehicle's total cost. What the coverage covers depends on the credit card issuer.

Temporary car insurance on a borrowed car

If you borrow a friend’s car regularly, you may be concerned about insurance. As long as your friend has insurance on the vehicle, you are covered.

Because you don’t have an insurable interest in your friend’s vehicle – it’s not titled in your name and you are not related or living at the same address -- insurance companies usually won’t write a policy for it. 

Plus, you don’t usually need to. Most standard car insurance policies extend coverage to anyone the owner allows to drive the car (permissive drivers). That means if you’re in an accident, the owner’s liability coverages will cover those that you harm, and the collision coverage would cover damages to his own vehicle. As a friend, you should probably offer to pay their deductible and any premium increase after the accident.

Even if you have your own car insurance policy, it would be secondary to the car owner’s policy, so their policy would have to handle the claim up to their policy limits, then your policy would kick in. If you frequently drive someone else’s car, see about being added as a driver to the owner’s policy to make sure you’re adequately covered.

Temporary insurance for registration purposes

If you are buying and registering a car, you need to have it insured to legally hit the road, so buying temporary car insurance doesn’t solve your problem and is illegal in many states. You cannot purchase insurance to register a car and then drop it immediately afterward.

Some states have laws set up to prevent the practice. For instance, Florida will let car owners cancel their auto insurance policies during the first 60 days only if they can show proof that they no longer own the car or have replacement insurance coverage with another insurance company.

In states with insurance databases, insurance companies input when a person starts and cancels a policy. If you cancel a policy and don’t start a new one right away but still have a vehicle registered, you can be penalized. If your car is registered, the law requires insurance. If you don’t want to buy insurance, cancel the car's registration and don’t drive it -- or be prepared to face penalties and even the possible loss of your car.

Coverage for student drivers

Suppose your child attends college or university and has a car with them that they drive on a regular basis. In that case, they need full-time car insurance, not temporary car insurance coverage. But, if they don’t have a car with them at college and only drive during winter or summer break, you may be able to save some money by adjusting your insurance coverage.

You can remove your college student from your policy when they are at school and not driving. This can lead to significant savings as young drivers are so expensive to insure.

Don't forget to add them back to the policy after they return from break. You should check with your insurer before deploying this strategy. Some insurance companies require that all licensed members of your household are on the policy, including drivers who don’t use the car often or even at all. 

Car insurance for snowbirds and vacation homes

When you keep a car in another state for an extended period, you may need to register and insure the car there. Each state has its own rules, but in general, if you register a car in that state, you must insure it there as well. You'll need to consider insurance during the period when the car is stored; you may be able to reduce or drop coverage.

Short-term car insurance for international travel

If you are headed to Mexico or Canada in your car, you may need to check with your insurer before crossing the border. Most of the major insurance companies will extend coverage to Canada, but many exclude coverage if you are headed to Mexico.

Contact your insurer anytime you are headed out of the country and plan to drive to make sure you are covered or if you need to add a rider to your policy to extend your coverage. If you fly to another country and rent a vehicle, you should purchase coverage from the rental agency.

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