Short term auto insurance has become fairly common as the major carriers move to meet the needs of an increasingly diverse customer base. As the name implies, this type of automobile coverage last for a short timeframe and then expires, with no expectation of renewal. Under the right circumstances, a short term auto policy is a cost-effective way to manage your needs, but you should be aware of the risks before pursuing this solution.
The Mechanics of a Short Term Policy
While there are many options available, most short term policies share flexibility as their primary feature. More and more major carriers are offering this solution and allowing the insured to set the term of the coverage. This may be for as short as a single day, but usually does not extend significantly beyond three months. Because the temporary car insurance company is not assuming longer-term liability with the driver, these policies tend to be less expensive – the company knows that its obligation will end, lowering the chance that it will ever face a claim.
It is important to understand that the lower cost is on a relative basis. Drivers needing coverage for a few days here and there are benefitted from the short term option. It is also an effective way to get coverage as a bridge between to you to full coverage. If you are buying a car, for example, and wish to be more thorough in searching for possible carriers, but cannot wait to have some coverage and delay the purchase, short term coverage is a good solution. In these cases, the temporary nature of the policy serves a specific purpose that is otherwise unavailable, or that might be price prohibitive. On the other hand, stringing together multiple short term policies is a very expensive option and should be avoided (this is discussed below in greater detail).
This kind of policy can range in terms of the extensiveness the coverage included. On the low end, the policy may cover the car itself as very basic liability of the driver. On the other end of the spectrum, full liability and collision coverage is also available. The price range on these options can be significant, and which option to select is purely a matter of what level of protection you need. When considered with the risks, making a decision as to overage is manageable.
Who Needs a Short Term Auto Policy?
For those who drive very infrequently, a short term policy may be the best solution. Those who do not own a car and are either renting or borrowing car can benefit from this kind of policy. Most rental car agencies offer very basic coverage, but these policies are primarily designed to protect the property of the rental car agency by insuring the vehicle, not to protect the driver from serious liability in the case of an accident. Many of the same agencies require proof that the driver carries liability insurance, as many drivers who are renting a car on vacation or for business do. This is because while their liability is technically limited, if an uninsured driver causes an accident, the car owner may become a party to the suit.
In addition to occasional drivers, such as city residents who do not own a car but rent or borrow as the need arises, drivers will use short term car insurance as a bridge between other comprehensive policies. This may occur if an individual has let their policy lapse and wishes to re-establish coverage after buying a car, or if the individual has experienced a major life event, like a divorce.
Risks and Drawbacks
There are two common issues that arise with this type of coverage that should be considered. First, a short term policy expires at the end of the term, rather than automatically renewing like most conventional policies. If you are not vigilant, it is very easy to wind up with no coverage if you are using this as a temporary solution. In this case, having a new carrier in place is very important. The other issue is that individuals are prone to buy too little coverage under these conditions. It is easy to save money, but if you need short term car insurance coverage the money saved will be eclipsed by the additional costs that are possible. If you choose to go this route, be sure to get sufficient coverage.
