Question:
Do you have to have insurance on a car that has been totaled and
not replaced? Our insurance cancels soon and we haven't found a new
car to buy. Our agent said we should keep insurance or we will be
penalized when we buy insurance for the new car. Is this true? Who
will sell us insurance if we do not have a car?
Answer:
No, you don't have to keep insurance on a totaled-out vehicle. In
fact, there is a type of coverage meant specifically for people in
your situation.
After the insurance settlement is completed on a total loss
claim, many insurers will cancel your policy, effective the day
after the accident -- if you ask and don't already have a new
vehicle to transfer the coverage to. (See "
Can you cancel your policy after an accident
")
What your agent said is correct. Without continuous car
insurance coverage on you and your husband, when you get a new
vehicle to insure your rates could go up due to what insurance
companies see as a gap in auto coverage.
To be considered a preferred driver, and thus be offered the
best rates by most car insurance companies, you need to be
continually insured with an auto insurance policy.
Being without car insurance makes you a higher risk to many
insurers due to how their rating systems are set up (those with
gaps typically cancel due to non-payment, or cancel on their own
after getting an insurance card and thus are higher risks to
insure). In fact, some insurance companies won't offer you a
policy unless you've continually had car insurance for at least six
months before applying for auto insurance with them.
The non-owners policy
The insurance industry understands that there are licensed
drivers without a car to insure, but who still want car insurance
coverage. For these individuals, there is non-owners car
insurance coverage offered by some auto insurance
providers.
Non-owners can be used as secondary
liability coverage
if you borrow a car while searching for your replacement vehicle
or, depending upon the terms of your policy, may be primary
liability coverage when renting a car. For details about a
non-owner policy, see "
What is non-owners car insurance?
"
A non-owner policy is relatively cheap to obtain (typically $200
- $300 a year) because it can't be purchased or used when you own a
car. If you obtain such a policy to cover you and your
husband while you are without a vehicle, once you purchase your
replacement vehicle you'd need to inform your car insurance company
to transfer your policy to an owner's policy and give the insurer
the details of the car so they could calculate your new rates.
Since your agent brought up this issue about continual coverage,
and you cannot keep coverage on a totaled out vehicle, you should
contact your car insurance company to see if it offers a non-owner
insurance policy. If it does not, then shop around for a
carrier in your area that does offer a non-owner policy, such as
Progressive.
And you don't have to stick with the same insurance company that
you get a non-owners policy with. While shopping for a new
car, also shop around for
how much car insurance will cost
with various auto insurance providers so that you can get the
cheapest car insurance rates possible for the new vehicle.
(See "Pocket $1,102 just by shopping around")