Temporary car insurance: Can I buy short-term car insurance?

What is temporary auto insurance?

Temporary auto insurance is car insurance that lasts for shorter than a standard policy term. It's almost impossible to find and only offered in very limited locations.

Currently, we know of one insurer offering pay-as-you-go insurance coverage that can be put in place temporarily, Hugo. However, changes in the insurance market may mean more temporary auto insurance options in the future.

There are also temporary car insurance policies available for people visiting the U.S. from another country, but that largely applies to Mexican drivers; Canadians car insurance is valid in the U.S.

When do you need temporary car insurance?

There are a few reasons you might need a short-term auto insurance plan:

• You need to move a car that is normally in storage
• You want to sell a car that you currently aren't insuring (remember that any car you own and register legally needs insurance in most states, so this situation is unusual)
• You have inherited a vehicle and need to insure it to sell it
• If you are visiting the U.S. (note that Canadian car insurance policies are valid in the U.S.)
• If you're visiting Mexico, where U.S. car insurance policies aren't valid; U.S. car insurance is also valid in Canada

How to get temporary car insurance

There are only a couple of ways to get temporary car insurance:

1. Sign up for a six-month car insurance policy and then cancel it when you no longer need it. There's no law to stop you from doing this, although you may not get a full refund if you cancel early. Insurance companies may use a process called short-rating as a penalty for canceling midterm.
2. Obtain pay-as-you-go insurance, which is only available in very limited areas.

Remember that you are required by law to insure any vehicle you own and register in every state but New Hampshire. It's illegal to cancel your insurance if the car is still registered, even if you are not driving it.

How much is temporary car insurance?

Since temporary car insurance is very rare in the U.S., the cost of “temporary car insurance” is whatever you have to pay to start a standard six-month policy. Insurers consider several factors when setting a premiumThe payment required for an insurance policy to remain in force. Auto insurance premiums are quoted for either 6-month or annual policy periods., 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 $511 a year for a minimum coverage policy, which means a six-month policy would cost around $256, on average. 

Hugo, the one true temporary car insurance we know of, doesn't list rate information.

Do auto insurance companies sell temporary car insurance?

Major insurance companies do not sell temporary insurance for cars. Most insurers write car insurance for a period of six months (some, but not many, offer 12-month terms). While you can usually choose between monthly car insurance payments or paying the entire premium upfront, the coverage term is still six months. Insurance companies rate your policy based on covering you for that period of time.

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.

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.

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.

Other ways to get cheaper car insurance for infrequent use

While temporary insurance policies are not usually an option, you might be able to adjust your insurance to get cheaper rates or to cover a car for occasional use. 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 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 claimAn insurance claim is a request you make to your insurance company for coverage after your car is damaged or you have an accident. You can file a claim online, by phone, or in writing. 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.

There are two main options for insurance when renting a car:

1. Buy coverage from the rental car company. This is usually a per-day fee. Be sure to ask what is covered; you need full coverage, not just a collision damage waiver.
2. Buy a non-owner car insurance policy. Cheaper than standard coverage, non-owner insurance covers you when you are driving a car you don't own. Bear in mind that this only provides liability coverage, so you may still need to purchase the collision damage waiver from the rental car company, unless you have a credit card that includes coverage.

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 coverageCollision coverage helps pay for repairs or replacement of your car if it's damaged in an accident, regardless of who is at fault and is subject to a deductible. would cover damages to his own vehicle. As a friend, you should probably offer to pay their deductibleThe deductible is the amount you pay out of pocket for a covered loss when you file a claim. 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 report 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. You can also ask about a student away from home discount, which keeps the student on the policy but reduces the rates because they're away. This is the better approach and ensures your student is covered any time they do use the car.

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 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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