Can Another Party Insure Your Financed Car?

Depending on the lender, the insurance company, and you, it might be possible to insure a car that is financed and owned by another person.
Written by Michelle Ballestrasse
Reviewed by Kathleen Flear
While it is hard to insure a financed car that you don’t own, it can be done if the parties involved can prove insurable interest.
As unlikely as it may sound, there are several instances where a person has to insure a car that is not in their name. This can be made even trickier if the car itself is financed through an auto loan and is still being paid off.
But there are certain circumstances in which a lender will permit someone other than the borrower to insure the car.
If you want to save money on
car insurance
, the
app is a good place to start. Read on to learn more about how to insure a financed car that is not in your name.
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What is a financed car?

A financed car refers to any car that was purchased via an auto loan that the owner is still paying off.
The lender behind the loan is now considered a lienholder on the car until the loan is paid off. These lenders usually require the name on the car’s insurance policy to match the loan borrower’s name.

When would someone need to insure my financed car?

The most common reason for insuring a financed car that belongs to someone else is when the car itself is a gift.
This is especially true when the car is gifted to a teenager who just received their license but doesn’t yet have the means to buy a car themselves or take over payments for the loan.
Another instance is if your spouse or partner doesn’t qualify for reasonable or workable auto loan terms, but you do. The car can then be purchased under an agreement between parties that your partner’s financial obligation to the car is the insurance.
Less common, but still occurring, is if the car is owned by someone who is no longer capable of driving it, and a trusted friend, relative, or caretaker uses the car in their stead. If that person is incapable of taking over the auto loan, they can opt to at least pay for the insurance and maintenance on the car.
Key Takeaway Lenders will not always allow a financed car to be insured by someone who isn’t the borrower.

What is insurable interest?

Insurable interest is the financial stake the car’s owner has in the vehicle.
If you bear financial responsibility for the car, it’s only reasonable that you’d want to protect your asset. This assures insurance companies that you’ll most likely be a careful driver because you don’t want to risk losing your investment.
A non-owner who wants to insure the car, on the other hand, doesn’t have insurable interest in the car because they are not financially liable for it. Even if they do get insurance on the car, the only money they’d be liable for is the deductible. All other liability falls on the car’s owner, regardless of whether or not they were behind the wheel.
Insurance companies worry that a lack of insurable interest could potentially lead to reckless driving or vehicle neglect. This is what makes insurance companies more hesitant about insuring a person who is not the owner of a vehicle.
Key Takeaway Insurable interest is the most important factor in persuading an insurance company to insure a car that you don’t own.

How to prove insurable interest

Demonstrate need

One of the most effective ways to prove insurable interest is demonstrating need.
If you have a regular need for the car, such as commuting to work, caretaking for the car’s owner, etc., then you have a vested interest in the car being kept in the best condition possible.

Co-title the car

Another way to prove insurable interest is to add your name to the
car's title
Having legal liability for the car is definitely an easy way to prove you have a stake in the car’s well-being. The only caveat is that this can be tricky to do.

Finding cheap car insurance

Once you’ve proven insurable interest, the next step is to find an insurance plan that is right for you. The
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What issues can arise from insuring a car you don’t own?

The biggest issue that concerns insurance companies when it comes to insuring a car that their policyholder doesn’t own is potential for fraud. Because of this, some insurance companies may refuse to insure a financed car owned by someone other than the inquiring customer, even if they live in the same residence.

Can you get insurance on any car that isn't in your name?

If you demonstrate insurable interest, it’s entirely possible to insure a car that isn’t in your name, financed, or fully paid off.
But that doesn’t mean that every insurance company will do this. When shopping for insurance, be sure to ask about the company’s policy when it comes to cars owned by other parties.
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