December 11, 2018

Don’t own a car, but you still need an Auto Insurance policy.

January 11, 2018- by Willy Hoffman Jr, CIC

This may sound odd, but even though you don’t own a car, you should still have an Auto policy.  It is called a Named Non-Owner Auto policy and it is specifically for people that don’t own a car or have a car furnished for their regular use.  The Named Non-Owner policy provides Liability and Uninsured Motorist (UM) coverage just like a regular Auto policy, it just does not include any Physical Damages (commonly referred to as Comp and Collision) coverage since you don’t own a car.  The main reason we recommend that everyone have an Auto policy is for the UM coverage.  This coverage protects you in the event you are injured by a vehicle that has either no insurance or not enough insurance.  This coverage has nothing to do with you owning a car.  For example, you could get hit by drink driver while you are a passenger in a car (Like riding in an Uber, Lyft, or cab), riding a bicycle, or just walking across a street.  Another great thing about this coverage it that it does not apply to just you, but it applies to all your household family member, like your wife and kids.  So, if your teenage son is riding in a friend’s car, he is covered.

Many people mistakenly believe this coverage is not needed because they have health insurance.  The problem is that in the event of a serious injury, health insurance only covers the medical bills (and not all of them), and does not include things like lost income and other expenses (having to fly to the Mayo clinic in Rochester, MN).  Many people also mistakenly believe that the person who causes the injuries will be liable and that their insurance will pay for everything.  The problem is that many cars on the road have no insurance, and the vast majority of those that do, only have $100,000 in Liability coverage per person.   Sure, the owner of the car is liable for your injuries over and above what his insurance covers, but good luck collecting. 

The only way to get this UM coverage is on an Auto policy, which is why you need a Named Non-Owner Auto policy even if you don’t own a car.  If you don’t own a car and commute to work on a bicycle, you definitely need this policy.  For example, you are hit by a drunk driver while riding your bicycle and suffer $200,000 in medical bills and $100,000 of lost income.  If the drunk driver has the typical auto policy with only $100,000 in coverage per person, you would get nothing for your $100,000 of Lost Income.  Your health insurance company gets first dibs on any collectible insurance, so they would get the $100,000 in coverage from the drunk driver, leaving you with nothing for your $100,000 in Lost Income.  However, if you had a Named Non-Owner Auto policy with a $500,000 limit, they would pay up to your $500,000 limit, minus the $100,000, that was paid by the drunk driver’s insurance, so they would pay up to $400,000 for your Lost Income and other expenses (co-pays, deductibles, etc…). 

Since I started working here full time in 1991 I have been keeping a log of all the Auto claims over $500,000.  All but one of those claims have been UM claims, meaning they were not caused by our clients, but our clients were injured by other drivers who either had no insurance or not enough insurance.  All of these claims were caused by drunk drivers.

The other nice thing about having an Auto policy is that it covers you for Liability when you rent a car or borrow a friend’s car.  There is no Physical Damage coverage on the policy, so if you rent a car, you still need to purchase their Collision Damage Waiver, but the $500,000 of Liability coverage on the policy would protect you in case you contributed to an accident while driving the car. 

If you don’t have any agent to help guide you through these complex coverage issues, you should!