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Car insurance for a vehicle you aren’t driving

If your vehicle is out of action, you have plenty of money saving insurance options to consider.

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Roslyn McKenna

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What happens to your car insurance when your vehicle is temporarily parked? Maybe you have a sporty convertible you only take out in summer, or maybe your pride and joy is gathering mothballs while you’re overseas for work. No matter the reason, find options for lay-up insurance or temporary car insurance for a car you’re not driving.

Do I need car insurance if I don’t drive my car?

As long as your car is registered in the state where you live, you’ll be required to maintain the minimum amount of coverage required by your state, which is typically at least liability coverage. But you may be able to drop additional coverage you’re not using, like roadside assistance or collision coverage.

When should I put my car insurance on hold?

There are several reasons why you might want to temporarily suspend car insurance for a vehicle you’re not currently driving, including:

  • Your vehicle is kept in storage for long periods of time
  • Your car is broken down and in need of repair
  • You’ve been temporarily posted overseas for work
  • You’re traveling overseas for an extended period, for example on a backpacking vacation
  • You’re seriously ill or injured and unable to drive

How can I save on car insurance when I’m not driving?

If you’re not sure what to do with your car insurance while your vehicle is out of action — here are some options to consider:

  • Cancel your policy. The simplest option is to cancel your policy completely and then purchase new coverage when your car is back on the road again. This means you won’t have to pay anything for insurance while your car is out of use. However, you won’t have any coverage in place against off-road risks like fire, theft and vandalism.
  • Reduce your level of coverage. If you don’t want to cancel your policy, you may want to reduce your level of coverage – for example, switching from a comprehensive car insurance policy to the state minimum coverage. This allows you to save money on your premiums while still maintaining a certain level of coverage for your vehicle.
  • Choose laid-up coverage. Some insurers offer the option of lay-up coverage, which is designed for vehicles that are off the road while they undergo repair or restoration. This allows you to insure your vehicle against a wide range of risks, but at the same time reduce your premium.
  • Consider restricted-use coverage. Also known as pay as you drive car insurance, these policies allow you to save money by only insuring your car for a limited number of miles each year. The less you drive your car, the less you pay for insurance.
  • Suspend coverage. In some cases, the insurer may be willing to let you suspend coverage for a temporary period. However, this option is not commonly offered.
  • Remove yourself from coverage. Consider removing yourself from your car insurance policy for a temporary period. If you’re no longer a listed driver, you can lower your premiums but still retain coverage for other drivers.

Canceling your car insurance policy

The first option is to cancel your car insurance coverage altogether and then, when you’re ready to hit the road again, take out a new policy. This is the simplest way to save money on your premiums, as you won’t have to worry about paying for insurance while your car is off the road.

You’re free to cancel your car insurance with any insurer at any time. But you may be charged a cancellation fee. Many insurers will also refund the unused portion of your premium, but it’s worth checking the fine print to make sure before canceling. If you’re paying your premiums by the month, there will be no need for a refund.

The biggest drawback to canceling car insurance is that you won’t have any coverage in place for your car. While you might think it’s a big deal, it means you won’t be covered against a range of non-driving risks. Fire, storm, hail, falling trees, theft, vandalism and flood can all cause costly damage to your vehicle while it’s off the road. Without car insurance coverage in place, you’ll have to pay to repair the damage out of your own pocket.

Also, most car loan lenders require you to at least maintain comprehensive car insurance coverage for the life of the loan. So if you haven’t paid out a loan secured by your vehicle, this option won’t be a viable choice.

Pros

  • You can cancel at any time
  • Option offered by all insurers
  • The unused portion of your premium will usually be refunded
  • You won’t have to pay anything for car insurance while your vehicle is out of action

Cons

  • Cancelation fee may apply
  • Most car loan lenders require you to maintain insurance coverage for the life of the loan
  • Your car won’t be covered for non-driving risks, for example, storm damage, theft and vandalism
  • You’ll need to go through the hassle of canceling, and then comparing policies and buying a new one at a later date

Reducing your level of car insurance coverage

If you’re not comfortable canceling your policy and you want to maintain a certain amount of protection, you may want to consider switching to a lower level of coverage. So if you currently hold comprehensive car insurance, you could find cheaper car insurance by scaling back to a bare minimum policy. While the liability section of the policy wouldn’t be used because your car is off the road, you’d still be covered for loss or damage due to fire and theft.

However, there are downsides to this approach. First, the reduced level of coverage may not be sufficient for your needs, as there are still non-driving risks, such as storm and flood, that could cause costly damage to your vehicle. Second, if you’re still paying off a car loan, you’ll typically need to have comprehensive car insurance in place.

Pros

  • An easy way to save on car insurance premiums
  • Still covers your car against fire and theft

Cons

  • You’re still paying for liability coverage which you won’t be using while your car is off the road
  • No coverage for some other risks, such as storm and flood damage
  • If you have finance owing, the lender will usually require you to maintain comprehensive coverage

Choosing lay-up car insurance coverage

You may want to search for an insurer that offers lay-up car insurance coverage. Designed for car enthusiasts, these policies provide protection against a range of risks while your vehicle is off the road, including:

  • Fire, storm and flood damage
  • Damage from falling trees
  • Theft and vandalism
  • Theft of parts
  • Damage in transit
  • Damage at a repairer’s or restoration shop

However, while this solution is definitely worth considering for anyone restoring a car, it’s not suitable in all circumstances. If you’re going overseas for an extended period, for instance, then you’ll need to look at other options.

Pros

  • Perfect if you’re restoring a vehicle
  • Covers a wide range of non-driving risks
  • Cheaper than buying comprehensive insurance for the same vehicle

Cons

  • Designed for car enthusiasts restoring unique or classic vehicles so is not suitable for everyone
  • More expensive than other options

Choosing restricted-use car insurance coverage

Restricted-use policies are designed to help people who don’t drive their vehicles often save on the cost of car insurance. The premise behind these policies is simple: it doesn’t make sense that someone who drives 2,000 miles a year should pay the same for car insurance as someone who drives 20,000 miles a year. This policy offers a way for you to only pay to cover the miles you actually drive.

If you know you won’t be driving your car for an extended period, such as three months out of the next 12, you can choose to insure it for a reduced number of miles. This can lead to a significantly reduced premium but still lets you enjoy the peace of mind of comprehensive insurance coverage.

Pros

  • Simple way to save on coverage
  • Drive less, pay less
  • Still provides all the usual benefits of a comprehensive car insurance policy
  • You can top up your mileage limit (for a cost) if you might exceed it

Cons

  • If you make a claim and you have exceeded the mileage limit specified in your policy, an additional excess applies.

Compare quotes for pay-as-you-drive car insurance

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Suspending car insurance coverage

Most insurers don’t allow you to suspend car insurance coverage. However, some may be willing to help you out in extreme circumstances such as serious illness or injury, and it can’t hurt to give your insurer a ring and ask whether this is possible. You’ll usually be required to just cancel your coverage or consider other options.

Pros

  • You won’t have to pay for coverage while you’re not using your car
  • Keep the policy and level of coverage you want
  • No need to compare and choose a new policy

Cons

  • Option not offered by most insurers
  • Your car isn’t covered for non-driving risks such as fire, theft, vandalism and storm damage
  • If there is outstanding finance on your car, you’ll probably need to maintain car insurance coverage at all times

Removing yourself from the policy

The final option is to consider temporarily removing yourself as a listed driver from your policy. If you know that you won’t be driving the vehicle for an extended period but other people will, this allows you to reduce the cost of insurance but still maintain the same level of coverage.

Many insurers allow you to add or remove drivers from your policy online, but in some cases, you might need to call your provider. Of course, you’ll need to be sure you won’t need to drive the car when you’re not listed on this policy, as any incidents that occur with you behind the wheel could be very costly.

Pros

  • Save money on premiums
  • Maintain the same level of coverage for your car
  • It’s usually easy to remove a driver from your policy

Cons

  • If you’re not listed as a driver, either the policy won’t cover you when you get behind the wheel or you’ll be required to pay an unlisted driver excess should you need to claim

Can car insurance be transferred to another person?

No. Insurers consider a wide range of factors before deciding whether to insure you, including:

  • Your age
  • Your gender
  • Your driving experience
  • Your history of traffic infringements and penalties
  • Your claims history

Not only do these factors determine whether or not you will be covered, but they also affect your premium amount. As a result, you can’t transfer your car insurance to another person; they will have to apply for their own person.

Bottom line

If you need to pause or suspend your car insurance without canceling outright, you do have some options. Talk to your insurance provider to find out the best option for the level of coverage and period of suspension you need. If your current provider won’t help you out, compare other car insurance providers to find the right option for you.

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