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Insuring A Car You Don't Own

If you're out of college, on your own and driving your parents' car, you have two main options:

1. Buy the car from your parents.

"The cleanest solution is to transfer the title to the young adult," Newman says.

Whether you buy the car, or your parents give it to you, having your name on the title will enable you to purchase your own insurance policy.

Newman recommends this route because:
  • It's the least complicated.
  • As the policyholder, you can begin building your own insurance track record.
  • If your parents are no longer on the car title, they no longer have any liability. Then you're free to purchase the appropriate amount of coverage for your needs, Newman says. Chances are you have fewer financial assets to protect than your folks do.

If your parents simply add your name on the title but still retain partial ownership of the car, they can still be held liable if you cause an accident that exceeds your policy limits. This is something your parents should keep in mind.

"If they wish to keep their names on the car title and the child gets the insurance for it, then it's a good idea for the parents to be added to the policy as additional insureds, so they will be notified of any insurance changes, such as a lowering of limits or cancellation of the policy," Gusner says.

2. Search for an insurance company that will consider your unique circumstances.

"It is possible to insure a car you don't own, but you have to search for the few companies that allow it," Gusner says.

Most companies, such as Esurance, require you to own the car.

Or your parents can search for a company willing to insure the car and list you as the primary driver, even though you don't live with them anymore.

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