Can I own a car without insurance?

Can I drive a car off the lot without insurance?

Many wonder, “do you need car insurance to buy a car and drive?”

While buying a car without insurance can be done in some cases, no dealer will let you drive off the lot without insurance. Driving a new car without insurance is never a good idea anyway.

If you’re financing, you need to buy full coverage. The average cost of full coverage auto insurance is $79.58/month.

  • When you purchase a car from a dealer, you are liable for the vehicle as soon as you sign the bill of sale.
  • You must have coverage for your car, as driving without insurance is illegal.
  • The state can penalize you for not having insurance if you don’t get insurance before you drive off the lot.
  • Since the dealer submits your application for tags for you, the dealer must see proof of insurance.
  • When you buy a car outright, you’re only legally required to have liability insurance to drive away.
  • When you finance a car, you have to have both liability insurance and full coverage to satisfy the state and lender.

All you need to test drive a car is your driver’s license.

If you want to get behind the wheel of your dream car, you can walk onto any dealer lot, browse the inventory, speak with a car salesman, and hand over your license so that you can see how the car you like the most really handles on the road.

What happens if someone else is driving my car and gets in an accident?

When an uninsured driver borrows an insured car:

Depending on the insurer and the situation, you may be covered if you give an uninsured driver permission to drive your car, and they cause an accident. Your liability coverage can pay for damages up to the limits of your policy. If you have collision coverage, your insurer may also cover the damage to your vehicle. If another driver causes the accident, their insurance will be responsible for the damages.

When an insured driver borrows an uninsured car:

If you lend your uninsured car to someone who has insurance, their policy will usually cover any damage or injury they cause to someone else. However, damage to your vehicle likely won’t be covered. You may also be liable for some of the damages if the driver’s insurance doesn’t cover the full amount.

When an insured driver borrows an insured car:

Your vehicle is covered, but based on the circumstances of the accident, damage, and policy coverages, it may vary as to whose insurance company will handle the claim.

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What is the penalty for driving without insurance in Michigan?

This brings us now to the most draconian part of Michigan’s law – the part that is specifically meant to penalize and punish those driving without insurance. Michigan’s No-Fault law makes an uninsured driver – even one who is completely innocent and who was seriously injured – barred from bringing a lawsuit against a negligent driver and then even makes the uninsured driver financially responsible for everyone else’s medical expenses and lost wages.

In other words, if you are driving your own uninsured car or truck and if you are involved in a car accident that results in injury to another driver, even if that other driver was negligent and caused the car accident, you still have to pay. You will have to reimburse the auto insurance company of the negligent, at-fault driver for whatever they pay out in No-Fault medical and wage loss benefits (and survivor’s loss benefits if someone was killed in the car accident).

This can mean you are potentially liable to following persons and/or their estate, if someone was killed as a result of a car accident:

  • Passengers in your vehicle
  • Drivers of other vehicles
  • Passengers of other vehicles
  • Motorcyclists
  • Bicyclists
  • Pedestrians

The law in Michigan quite literally adds insult to injury. You are financially liable to pay to reimburse the auto insurance company for the No-Fault benefits paid to the driver who was at-fault in causing the car accident, even if he or she was 100% at-fault and he or she was drunk or drugged or texting or speeding or driving in the wrong lane or running a red light or all of these things. When I speak at seminars to car accident attorneys in other states, they literally are astonished at just how draconian and punitive the law is in Michigan.

This is why I wrote above that people who think they cannot afford car insurance are the same people who literally can’t afford not to have car insurance.

Consequences of No Auto Insurance

Some people wonder, do you really need insurance to buy a car? It may seem like no big deal to try to slide by without auto insurance, especially if you only plan on doing so for a short period of time.

However, know that if you ignore buying auto insurance, you may end up having to pay for property damages and bodily injuries.

You will face some major ramifications if you are in an accident or stopped by law enforcement without the proper insurance coverage in your state.

Penalties for no insurance vary by state but usually include:

  • Large fines of $1,000 or more
  • Jail time
  • Community service
  • Suspension or revocation of your driver’s license
  • Suspension or revocation of your car registration
  • Court appearances
  • SR22 insurance requirement

Even if you do not cause any property damages or bodily injuries, you will be subjected to these penalties. If you are caught multiple times driving without auto insurance, the penalties will increase.

Do you need a new policy if you’re adding or replacing a car?

If you have an existing policy, it will cover your new car between four and 14 days. Check with your insurance provider for the exact timeline. You’ll need to update or replace your policy after buying a new or used car, and it’s best to do so as soon as possible. That’s because your new car will only be insured up to the actual cash value of your existing vehicle. You can update your policy before or shortly after purchasing your new vehicle by contacting your insurance agent or logging into your online account. 

Are there other ways to prove you’re financially responsible?

There are two different types of laws concerning auto insurance: mandatory insurance laws and financial responsibility laws.

In states with mandatory insurance laws, residents have no choice but to buy an insurance policy. In states with financial responsibility legislation, you can prove that you have the resources to cover damages in more than one way.

Insurance is still the most popular option in states with these financial responsibility laws, but you can also put up your own money or purchase a surety or real estate bond to play by the rules.

Remember, if you choose to put up your own money or your home as collateral you’re risking losing all of this if you’re an at-fault driver in a catastrophic loss.

Insurance premiums add up, but it’s a very risky gamble to avoid paying premiums by putting up your assets.

If you’re willing to take complete responsibility for the financial burden to avoid paying premiums, these are alternatives to consider where you can self-insure.

What is new car insurance?

The value of a new vehicle typically drops by 10% as soon as it’s driven off the dealer’s lot, and it can decrease another 20% over the course of the first year.

Let’s say you purchase a brand-new car using a $15,000 auto loan. After the first year, you owe $12,000 on the loan — but the car’s value has dropped to $9,750. If you get into a serious accident and the car is totaled, your insurance company would only cover the car’s actual cash value of $9,750, minus any deductible. You would owe your lender the remaining $2,250 out of pocket.

However, there are special types of coverage made for owners of new cars.

New car replacement coverage

New car replacement coverage pays to replace your new vehicle with another one of the same make and model, and with the same features and upgrades. This addition to your policy will increase your premium, but it protects you against the decline in your car’s value.

Because a car’s value drops the most within the first few years, new car replacement coverage could be a good option for the first few years you own the vehicle. But if you’re comfortable taking on the risk, you can skip this coverage and the higher premium that goes with it.

Repair provision coverage

This type of coverage reimburses you for car repair costs above and beyond the vehicle’s actual cash value.

Gap coverage

Guaranteed asset protection, or gap coverage, is especially valuable for those who have leased or financed their vehicles. If you total your vehicle before paying it off, your insurance company would pay the actual cash value of the car and you’d be on the hook for the remaining balance. But gap coverage takes care of the difference between the actual cash value and the amount you still owe.

Comprehensive and Collision: Are They Important?

If you’re buying a brand-new car or a late-model used car, add comprehensive and collision coverage. CarInsurance.com says most lenders require it. Even if it’s not mandatory, the added coverage will protect your interests if the car is stolen or damaged in an accident. Without comprehensive and collision, you could end up paying big bucks out of pocket.

State penalties for driving without insurance

The penalty for driving without insurance is different in each state. The table below describes penalties for first-time offenses by state. Some state governments will even imprison people for driving without insurance.

Options for the car owner when letting someone borrow their car

  • Permissive Use: Due to the "omnibus clause" family members, spouses, and children are considered permissive use drivers. People of close relation living in the same house may use the car with the insured's permission, unless the insured specifically lists them as "non-permissive use" drivers. As always, have the car owner check with their insurer beforehand.

Note that in some states, permissive drivers receive less coverage.

  • Listing Drivers On Their Policy: The insured may also list people on their policy who are allowed to use their vehicle. This ensures coverage under that policy. Even if you meet the permissive use requirement, it's good to have them list you specifically. This is especially helpful if you plan to borrow the insured's car often and for an extended period of time.

Need help finding a lawyer? Call Michigan Auto Law

Unfortunately, as I wrote above, if you are the owner and operator of your own motor vehicle and injured in a car accident, the law in Michigan will prevent me from helping you.

However, if you or a loved one has been injured in a car accident caused by someone driving without insurance, you still have important legal rights including the right to sue and bring a lawsuit for your harms and losses. If you would like to speak with an experienced personal injury attorney, call toll free anytime 24/7 at (800) 777-0028 for a free consultation with one of our injury attorneys. You can also get help from an experienced accident attorney by visiting our contact page or you can use the chat feature on our website.

Tips for borrowing someone elses car

A few tips to remember before borrowing someone else's car:

  • Ask the insured driver to check their policy for terms involved with loaning their car to you.
  • Make sure you have a valid driver's license before borrowing someone's car.
  • Be certain that the insured has their registration and insurance information in the car's glove box.
  • If you plan to use the insured's car habitually, ask them to add you to their policy as a driver. This protects you both.

Best Car Insurance Companies 2022

With so many choices for car insurance companies, it can be hard to know where to start to find the right car insurance. We’ve evaluated insurers to find the best car insurance companies, so you don’t have to.

What to Know If You’re Trading in a Car

It’s a good idea to call your car insurance agent ahead of time to find out what you need to know if you’re trading in a car. Ask for a quote to insure the cars you’re considering. Find out how much it will cost and what the deadline is for notifying the agent of the final purchase, advises EverQuote. The existing coverage on the car you’re trading in will generally transfer to the new vehicle, often for as long as 30 days.

If you don’t call your agent first, inform them about your new set of wheels as soon as possible. If you don’t, the time limits to notify your carrier could fly by, and you could find yourself driving without car insurance. Get caught on the road without coverage, and you could face tickets and hefty penalties.

Remember, only the coverage you had on the old car will temporarily extend to the new one. If you purchased strictly the state minimum liability coverage, then that’s all that will be protecting your new vehicle. If it’s stolen or you get into an accident on the way home, you could be responsible for the balance of your new car’s loan.

Our recommendations for car insurance

If you’re in the market for a new insurance policy, you’ll want to secure the best possible rates. Because car insurance costs can vary by individual, there is no single best provider for every driver. That’s why the only way to find the right policy for you is to shop around and compare offers. Use the tool below to compare free car insurance quotes from several top providers in your area.

Can you get car insurance without a license?

If you own a car but don’t drive, you may be able to purchase a policy and list yourself as an excluded driver. That ensures the vehicle, and anyone else listed on the policy (such as your spouse or children), will have the necessary coverage. However, many insurers are wary of taking on customers without a license, and some states require at least one licensed driver to be listed on a policy.

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