What You Need to Know About Out-of-State Insurance for Your Car
There are many reasons you may consider insuring a car in a state other than the one in which you live. You may spend several months of the year in another state. You or your child may be away from home attending college. Or you may just be tempted to insure your car in a different state where rates are lower.
If it's that last example, forget it. Registering and insuring your car in a state or city where you don't live just to save money is a fraud. But in the other circumstances, you’ll need to discuss your specific case with an insurance agent to determine the best way to handle your coverage.
Can a Car Be Insured in Another State?
Insurance rates differ greatly from state to state, and sometimes even within states. This is due to many factors, not the least of which is the varying risks and costs associated with car ownership. For example, if you live in a particularly busy or crime-ridden city, your insurance costs will likely be higher than they would be in a rural area. There are even states that do not require auto insurance, including New Hampshire, Tennessee and Virginia. You may have to show proof of financial responsibility.
What if you do spend a significant amount of time regularly driving in a state other than the one in which you live? In very rare cases, some insurance policies will allow insuring a vehicle registered in a different state. If you qualify for one of these exceptions, make sure you’re listed as a driver on the car insurance policy.
What Can Go Wrong?
If you are committing car insurance fraud by purchasing a policy in another state, Things will go wrong as soon as you’re in an accident. It is likely that your insurer will refuse to pay the insurance claim, leaving you potentially on the hook for thousands of dollars. You could have your policy canceled. Of course, there are also criminal penalties. In most states, that means you won't be allowed to drive. If you're caught driving anyway, you may have your license suspended or revoked, or face additional fines or jail time.
When It Was Just a Mistake
Changing your car insurance policy is one more chore you must get done when you move from one state to another — but you need to get it handled sooner rather than later.
Let’s say your car is registered and insured in Florida but you recently moved to New Hampshire. You’re in an accident and file an insurance claim. The insurance claims investigator is going to ask what you were doing in New Hampshire. If you reply that you live there now, your claim might be denied.
All of the above is fairly cut and dry, but there are a few fairly common situations with their own quirks.
Car Registered in One State But Used in Another
Let’s say you buy a car for use by a family member, perhaps for a son or daughter who is in college in another state. Or, your job requires you to work in another state for several months.
Most car insurance companies require that the car be registered and insured in the same state. And, most state motor vehicle departments require that the car be registered in the same state as reflected on their driver's license.
Some insurers have special options for such situations. You should ask an insurance agent how it should be handled.
Car Owner in One State Car Driver in Another
If you are a two-car family, both cars are probably under the same insurance policy. But what if the driver of one of the cars is moving to a different state?
If you’re the sole owner of the car, you may be able to register the car in the state in which the driver now lives and get a new policy for that driver. It is probably more practical to transfer ownership of the vehicle to the driver unless you have a loan or lease on it.
The Snowbirds' Dilemma
Car insurance causes one of the complications of owning an out-of-state vacation home.
For example, take the case of a couple of snowbirds who travel from a Northern state to Florida every winter. They will need to have Florida car insurance if their vehicle is in Florida for more than 90 days per year.
Most other states have similar requirements. That means you’ll be dealing with two different insurance agents and policies.
If you decide to keep a car permanently located in one state, theoretically you have the option of canceling your insurance coverage at the end of each season, then surrendering your license plates and canceling your vehicle registration. Then, presumably, you'll undo the whole process at the beginning of the next season. However, if your car is damaged or stolen while uninsured, you're out of luck.
This isn't even an option if your car isn't paid off. This is because most lienholders require borrowers to have insurance on the vehicle being financed.
A better option would be to contact your insurance agent and explain your situation. Some companies have substantial discounts for stored cars or drivers with low mileage.
If your insurer is a big multi-state company, you might even be able to get a discount for having policies in multiple states. If you would rather go with a small provider in your vacation home state, ask about vacation home and car insurance bundles to save on both.
Active Military Personnel
If you are traveling as part of your military service, you are generally required to declare a state of legal residence. This is generally the place you will return to after the end of a tour or when you retire. Your car should be registered and insured in that state.