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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.