Short-term car insurance seems like a great idea, but what are you really getting?
Lots of websites throw around the terms “short-term” or “temporary” car insurance without mentioning which companies actually provide it or where to buy it. That’s because most standard insurance companies don’t offer policies shorter than 6 months in duration. In this sense, the terms “short term car insurance” or “temporary car insurance” actually entails a different process than they suggest. Basically, it requires you to cancel your 6-month or 12-month policy mid-term. Still, if you’re looking to pursue an insurance policy on a short-term basis, there are some things you should consider.
As stated, the most popular insurance providers will only offer you policies that are either 6 months or a year long. Ideally, an insurance company wants to keep you as a client for as long as possible. Writing and selling policies that are only a week or a month long don’t facilitate their financial goals. From their perspective, clients who purchase a short-term policy aren’t likely to renew at the end of the term and thus they have less of an incentive to sell to them.
While it varies by company, most policies will begin with a down payment that is between 30-45 days of premium. If you cancel five days into your policy period, you’re not always guaranteed to get all your premium back.
Unless you live in the handful of states that don’t require auto insurance, your state probably requires you have to carry at least the legal liability limit. If you’re caught driving without insurance, you will most likely be ticketed and have your license suspended.
Furthermore, if you’re leasing or financing a vehicle, your lender will usually require you to carry the state minimums as well as comprehensive and collision—and certainly not in a short-term capacity. Keeping with the concept of short-term insurance, i.e., canceling your policy early, if your lender discovers you’re driving without insurance, you can risk getting your vehicle repossessed.
A lot of insurance companies will ask you if you’ve had 6 months of prior continuous coverage before agreeing to take you on as a client. Entering into a new relationship with an insurance company as currently uninsured could impact which companies you qualify for, as well as your premium.
This is a big risk you take when driving without insurance. If you're found at fault after an accident without insurance, you will most likely be ticketed, have your license suspended, and could even be sued for the property or liability damages you caused. Moreover, if you’re the victim of a hit-and-run type situation, you don’t have a collision or comprehensive deductible to soften the blow for any damages caused to your vehicle. If you wanted any damages to your vehicle replaced, you would have to pay for the damages yourself.
The idea of temporary car insurance is a nice one, sure. You have car insurance for when you need it and only then. However, it’s not a common practice for insurance companies to offer anything other than 6 or 12 month policy periods. If you want car insurance on a temporary basis, which we don’t recommend, the only way to create it is to begin and policy and cancel mid-way through. As we stated, this practice can land you in a lot of trouble for a number of reasons.
Although car insurance can be expensive, it’s cheaper than the world of trouble you can get yourself in if you’re caught driving uninsured or getting into an accident without insurance.