Do I maintain non-owner auto insurance or just cancel entirely?

September 22, 2007 11:25 AM

Non-owner auto insurance. Scam or just practical?

I recently sold my car, and intend to buy a car again soon, but I'm not sure when. It could be this month, it could be a year. When I called my auto insurance agent to cancel my policy, he suggested that instead of canceling entirely I maintain a non-owners policy, because supposedly that will make it easier to get insurance again later when I do get a car. I never knew it was difficult to get auto insurance (presuming you haven't done anything too terrible, which I haven't -- I've gotten a few speeding tickets in the past, but it's been over 5 years since my last, and that's the worst of it). Then again, I've had auto insurance continuously since I started driving when I was sixteen.

Is this just some sort of lame up-sell or way to maintain customers? Or is this a legit concern? Should I maintain my policy as a non-owner for a lower rate? I'm not really driving right now (no car), so presumably this would just be for future insurance reasons.

For the record, I am decent-to-great driver, with nothing terrible in my past (besides aforementioned speeding tickets). I do have a great low rate right now, with my current insurer. But no rate is still cheaper than a low rate.

posted by sa3z to grab bag (8 comments total)

I can tell you that my wife once let her insurance lapse after being dropped from her insurer. She then tried to get new insurance two weeks later. The prices were insane (3x her old rate) due to the fact that she'd been un-insured for a time.

We ended up adding her to my policy in order to get a reasonable rate.
posted by Octoparrot at 11:30 AM on September 22, 2007

i let my auto insurance lapse for 6 years while i lived in new york, and currently have a decent rate (i suppose it may be because i didn't drive for 6years, and therefore had no violations!).

i'm no expert, however--that's just my experience.
posted by thinkingwoman at 11:40 AM on September 22, 2007

I went many years without a car. When I got one and had to get insurance, the agent told me "you're XX years old, never had an accident or ticket. That'll get you a great rate with us!"

Your, uh, mileage may vary.
posted by gimonca at 12:58 PM on September 22, 2007

Depends, sa3z. If you ever drive someone's car (your parents? your friend to the hospital? etc.) and have an accident, the penalties for being an uninsured driver can be quite extensive even before you calculate any liability, which the owner's insurance company will want to put on your tab. (Locally, I've seen "driving car without permission" as a frequent court case in the police reports, which I generally presume to mean they had permission, weren't on the policy, and have now had an accident. In short, one family member had to charge another family member with a crime in order to get out from under a lawsuit.)

I had friends who spent a year in South America on a Peace Corps-like program, came back, and had trouble getting affordable insurance despite their exemplary driving records. So that is a risk.

You can mitigate the first by never actually driving, and the second perhaps by shopping around. It's even possible you could take a short-term insurance plan at highway robbery rates, and switch to a more reasonable one as soon as you can find one.
posted by dhartung at 1:06 PM on September 22, 2007

This question is extremely state-specific, so identifying the jurisdiction would be a good idea. In my state, if you are a driver but do not have a car, and if you are driving someone else's car, there will be one or more other carriers who will respond. The penalty in my state is for owning and driving an uninsured car, not being an uninsured person.
posted by yclipse at 3:58 PM on September 22, 2007

Car and Home insurance companies often have different rates for those who renew and for new business. New business rates can be better than renewal rates due to the "stickiness" of current customers who are less likely to switch based on price alone. Someone shopping around for rate has less incentive to go with a particular company if the rate isn't competitive.

That being said, insurers price to risk. If you are a poor risk, your rate will be high no matter what. The best you can do is find a company that uses an algorithm for pricing that for some reason misses labelling you as the risk you actually are.

So, all things being equal, if you have a safe driving record you should be a good risk no matter what. Prices will likely be better if you shop around. And don't feel bad about playing one company's price against another. You'll most likely get some on the spot discounts for your business - although those rates are for the first year and will probably go up once you renew (see first paragraph).
posted by qwip at 5:15 PM on September 22, 2007

The short of it: It's probably not a lame up-sell, but YMMV depending on which company you're with now and who you end up with in the future.

The long and boring of it:

The company that I work for (pervasive, insures in every state, you're in good hands and all) uses a tool called a "current carrier database". When we run a new quote for auto insurance, we use that to determine whether you've carried insurance continuously or whether you've had a lapse in coverage, for whatever reason. Lots of companies use these in every state in the US. If your current company uses one, the results of this search can affect your premium thusly:

We have two different "companies" under the brand name; a standard level and an indemnity level. Standard's premiums are half what indemnity's are. Standard is for good drivers with good credit who have maintained insurance with Bodily Injury Coverage for at least a year. Indemnity is for dodgy drivers with bad credit and/or who haven't maintained insurance (a one day lapse is usually okay), for whatever reason. For instance, if you have great credit and a clean driving record and have maintained your current policy for at least a year, we'll put you in our preferred company. If you have great credit and a good driving record but haven't had any insurance because you haven't had a car, great! We'll write you an indemnity policy. If you have crappy credit and a few tickets and a closed suspension and haven't had insurance because you didn't pay your bill, we're not going to write you a policy at all.

There are other variables (length of insurance can affect discounts, etc), but chances are, if your agent is telling you that it might hurt you to let your policy lapse, then you're probably with a company who actually counts a lapse in coverage for whatever reason as a ding against you (this is up to the individual company - it's not state regulated). You might get coverage, but your premium is going to suck. And since most insurance companies use a carrier database, they'll be able to tell if you've had a lapse.

Insurance typically follows the vehicle and then, if there's an accident and that coverage limit is exhausted, the driver's insurance is tapped. So if you're driving a friend's car and you don't have insurance, chances are, you'll be fine - it's covered as a lending loss. Of course, your relationship with your friend/family member might suffer if you cause their premiums to increase, so, you know. You take your chances.

We don't actually offer Named Non-Owner policies here in Florida, but I've worked in states (Virginia, to name one) that do.

Ask your agent for more details and then go with your gut. If they tell you that they count a lapse against you, you might want to go ahead and take the policy or start doing a little pre-shopping with other companies to see if you can find a company that won't hold the lapse against you.
posted by mewithoutyou at 5:24 PM on September 22, 2007 [1 favorite has favorites]

Sorry, I didn't mention my state earlier; I'm in Virginia, where it seems it does matter. Thanks for all the great input! I didn't realize this was actually a pretty complex issue; I thought I was just naive. I appreciate all the advice and information. I'm still undecided, but I think you all have given me a lot of good points to think about. Off to research current rates!
posted by sa3z at 10:21 AM on September 23, 2007