Car insurance is not just available to car owners or leasers. If you drive a car, each of the 50 states requires you to either have car insurance or provide “proof of financial responsibility”. Proof of financial responsibility is usually met by having car insurance.
No owners car insurance provides liability coverage for personal injury and property damage up to your policy’s limits from an accident in which you were at fault. No owners car insurance does not cover property damage to the car you are driving. There is no collision or comprehensive insurance coverage available under a no owners car insurance policy. Insurance companies sell this type of car insurance to those people that don’t own a car and does not routinely drive a car. Since you don’t own a car, you don’t have an insurable risk so car insurance companies will not sell you coverage that covers property you don’t own.
A lot of people assume they don’t need no owner’s car insurance if the car they are driving is already insured. So if you don’t own a car and the car you are driving has insurance, do you need no owners car insurance? If you are borrowing a car with the owner’s permission and the car is insured by that car’s owner, you would be covered by their car insurance policy, including their collision and comprehensive coverage that would cover their car’s damage (less any applicable deductable). In such a case, you are treated as permissive driver and are generally covered by that insurance policy. Your no owners insurance would be treated as secondary insurance to the car insurance policy of the car’s owner. However, there may be some coverage limitations when you borrow someone else’s car. Many car insurance policies have a provision to adjust the liability limits of the car insurance policy to the minimum liability limits required when a permissive driver is in an accident.
For example, you borrow (with permission) a car from a car owner who has a policy in California with a 50/100/25 limits. Assume that you have no insurance. If you are in an accident, you are treated as a permissive driver and are covered under the car owner’s policy. However, the owner’s car insurance policy likely only allows you, the permissive driver, the minimum liability coverage in California – 15/30/10 through the adjustment term in the car owners policy. If you were in an accident, you would be liable for the damages in excess of the car’s owner policy above the adjustment to minimum liability limits. If you have a no owner’s policy, your insurance would be secondary to the car owner’s insurance and provide coverage up to your no owner’s car insurance policy limits.
If you are in a serious accident and the damages you caused are greater than the coverage limits you purchased, you may be personally liable to pay for those damages that exceed your insurance coverage. So when you are shopping for a no owner’s car insurance policy, shop for substantial enough limits that will provide adequate coverage and protect your assets.
Read also: 7 reasons why you may need a non owners insurance policy.