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UPDATED: Mar 13, 2020
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Temporary car insurance is a type of auto insurance policy that has a limited coverage period. Technically, all car insurance is temporary auto insurance, but the term “temporary insurance” generally refers to a specific type of short-term policy sold by some companies.
Who is Temporary Car Insurance good for?
Temporary insurance is very useful for people who are leasing or renting a vehicle for a short period of time. For example, someone in the service may be stationed in a location for only one month and may not want to transport a vehicle across the country for such a short stay. In this case, the person may rent or lease a vehicle for this time period and need insurance coverage only for that time, and short-term or temporary insurance is the answer.
Another situation in which someone might want to purchase temporary insurance is when a vehicle is first purchased. Many companies will cover you from the moment you sign the contract to purchase your new car, but you may want to shop for insurance, especially if this is your first vehicle. It may make more sense to purchase a one-week policy while you look for permanent insurance, and a temporary policy meets this need very well.
Temporary insurance policies are also issued for special reasons, such as coverage during a hurricane. People who live in coastal areas may not want to carry expensive hurricane coverage all year and only want a policy that covers them during a specific time period, such as hurricane season or even for only one week when the threat of a hurricane is at its highest.
Finally, someone might want temporary insurance when a friend or family member visits and wants to use the family vehicle. The person can also be added to your regular insurance policy, but this could prove problematic if the visitor has an accident and you are forced to make a claim on your regular insurance policy. It is usually better to have a separate, temporary policy to cover any extra short-term drivers, especially those who are not part of your immediate family.
Understand the limitations of temporary insurance, especially when you are traveling!
If you have an accident and try to make a claim under your temporary insurance policy while you are in a state that does not honor temporary policies, you may have trouble collecting. Further, your insurance policy from the United States will not cover you in many foreign countries, including Mexico. In order to have coverage when you travel abroad, you will have to purchase an insurance policy specific to that country.
If you are renting a car, a special type of temporary insurance becomes important. Rental companies routinely offer drivers rental coverage on their rental contracts and drivers must accept or reject these policies. In most cases when you are driving for business or pleasure in the United States your own liability insurance will cover you for a rental car. However, when you rent a car oversees, your own insurance will probably not be sufficient to cover you and you should take out extra coverage through the rental company or another temporary insurance provider.
You should always find out if you are covered through the credit card you used to rent the vehicle before you accept rental car insurance.
Some credit cards offer you protection as part of the credit card’s benefits plan, so it makes no sense to take out rental insurance when you are already covered and pay twice for the same amount of insurance. Temporary insurance is useful when you are traveling, but you should make sure that you actually need it before you pay for it.
How do I buy Temporary Car Insurance?
Whatever your reason for choosing temporary insurance, many car insurance companies are willing to sell it to you, although not all states allow it. In states where temporary car insurance is not allowed, you will need to add the car or drivers to your regular insurance policy or buy a six-month term policy from your existing carrier or another insurance agent.
In states where temporary insurance is allowed, you have two options. If you have an established relationship with your own insurance carrier, it is usually cheapest to purchase your temporary insurance policy from this company. Many companies will sell you a temporary policy for a very low fee as long as you are already paying them substantial amounts in premiums. However, if you purchase temporary insurance from a company with which you do not normally do business, the company has more overhead involvement in writing your policy and inherently takes more risk, so your premiums will be higher.