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UPDATED: Mar 13, 2020
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Car insurance pays not only for damage caused to a vehicle that you own, but also for any damage you are responsible for causing with your vehicle. If you are liable for damage, you are legally responsible to pay for that damage. This is why the state requires you to carry auto insurance. If you just purchased a vehicle, you need to obtain insurance for it before you can register the car in your own name. Any new vehicle you purchase must have its title transferred and be registered to your name within 30 days of purchase.
Self-Insurance and Liability Coverage
In order to be road-legal, your vehicle needs to be insured with the state minimum for liability insurance for both property damage and bodily injury. This liability insurance is paid by your insurance company every time you are responsible for an accident that causes damage or injury to another party.
The only way to avoid paying for insurance is if you can prove that you are self-insured. In other words, if you are financially able to pay the state minimum in liability insurance whenever an accident occurs out of your own pocket, you can avoid insurance. Government vehicles are often self-insured by government entities, and some large corporations self-insure their cars as well. For the average citizen, self-insurance is not an option, and paying insurance premiums is much more affordable than potentially paying hundreds of thousands out of pocket for an accident.
What If I Won’t Be Driving the Car?
Some people choose to buy vehicles that they have no intention of driving. Perhaps the car is a classic roadster that will be used as a show piece once it’s restored. Maybe you purchased the vehicle to serve as spare parts for another car you’re working on. If you aren’t driving the vehicle, do you still need insurance?
In most cases, yes, it’s important to maintain insurance on a vehicle whether or not it will be driven. Cars are still capable of causing property damage when they are unoccupied. A vehicle might slip out of gear and roll down a hill, colliding with other parked cars; you would be responsible for that damage even though you were not in the car. Similarly, if you injure yourself while restoring your classic roadster, that injury could be paid by your car insurance; otherwise, those expenses would be paid out of your pocket.
Some car insurance companies offer a reduced-rate insurance for vehicles in storage. In some states, storage insurance does not need to require liability coverage, but more and more states are requiring liability to be maintained on a vehicle at all times regardless of its use.
If you purchase a vehicle for use as spare parts for another vehicle you are repairing, you may be able to avoid insuring it depending on the condition the vehicle is in. If your new car is deconstructed enough that it could no longer possibly be considered possible to drive, it would then be considered simply car parts. This can include a chassis, panels, engines or other disembodied vehicle elements.
You do not need to register car parts. If any damage occurs to a car part that’s not part of an insured car, that damage would be paid under your homeowner’s insurance rather than vehicle coverage.
If, however, you purchase a vehicle with intent to scrap it for parts, that car will still need to be registered and insured until it is sufficiently broken down into discrete parts. You can get by with carrying the minimal liability coverage on the vehicle in this situation, and drop the insurance once the car has been scrapped. Alternatively, you can have the vehicle torn down and scrapped before purchasing it to avoid the problem of needing to register it at all.
When purchasing a new vehicle, it’s a good idea to contact your insurance agent to discuss how to add the new car to your policy and what coverage you require. Once you have added your vehicle to the policy, you can register it without worrying whether you have enough coverage. Down the line, you can always adjust your policy if the purpose of the vehicle changes.