Many millenials – also known as Generation Y – are opting out of buying cars for a variety of reasons. Some choose not to drive because it’s better for the environment to walk, bike or take public transport.
And many Gen Y-ers don’t have enough money to own and operate a car. Generation Opportunity, a conservative nonprofit youth advocate group, estimated that the April 2013 unemployment rate for Americans age 18 to 29 was over 16 percent. Many of these young unemployed would be unlikely to be able to afford a car; according to AAA, in 2013 the annual average cost of owning and driving a sedan is $9,122.
However, if you don’t own a car but you drive your friend’s car from time to time, or use car sharing services such as a Zipcar or RelayRides, what happens if you get in a crash and the other person sues you for damages? You may have enough insurance coverage either through your friend’s policy, or the auto insurance coverage that car sharing services typically provide. However, if your friend’s liability limits on his auto policy are $300,000, and you are sued for $500,000, you would be responsible for paying the remaining $200,000.
And this is where a non-owner’s insurance policy would kick in. A non-owner’s insurance policy provides extra liability coverage and if you had a non-owner's policy in the scenario above, it would cover the $200,000 above your friend's liability limits. A policy typically costs between $200 and $300 a year.
Cindy Baroway, program facilitator and lecturer on risk management and insurance at the University of Colorado Denver, discusses the importance of a non-owner’s policy and why people who don’t currently own a car should consider buying this coverage.
What is a non-owner’s insurance policy?
Why would someone choose to buy a non-owner’s policy?
The law requires that to drive a car you must have insurance. You have no certainty that the car you’re driving has insurance on it -- maybe insurance has never been purchased, or the premium payment has lapsed and there’s now a gap in coverage. To protect yourself when borrowing a friend or relative’s car, you should consider a non-owner’s policy if you don’t have (car insurance). It really speaks to peace of mind.
Who would be a good candidate for a non-owner’s policy?
The best person would be a person living in a city that doesn't have a need to own a car but frequently finds himself in a situation where he might be driving – (such as) being a sales rep, borrowing a friend's car, driving a drunk friend home. Also, you would be a good candidate if you can’t afford to buy a car so you’re always borrowing cars. You still need the insurance protection.
Why are more young people choosing not to own a vehicle?
It could be anything from simple economics—they can’t afford the car payment, the car insurance, the gas, parking fees and maintenance. Or young people may not wish to have a car for environmental reasons. Or it could be that there are better public transportation options so they choose not to own a car.
Are non-owner policies expensive? And do you have any advice for someone who drives infrequently and is considering buying coverage?
A non-owner’s policy should be less expensive than an owner's policy because you aren’t insuring a specific vehicle or how often you use the car. Think of the questions you get asked when you purchase an owner’s policy: What type of vehicle? How many miles do you drive in a week? Do you keep your car in a garage?
Many of those questions aren’t pertinent to a non-owner’s policy because there’s no specific vehicle being insured. To anyone who’s considering buying coverage, I would suggest that you consider circumstances when you might be driving a vehicle and weigh that against the cost, and peace of mind, of having a non-owner’s policy.