What’s Insurable Interest in Car Insurance?

Last Updated on September 15, 2023

When shopping for car insurance, you may encounter the term “insurable interest.”

To buy car insurance for a vehicle, for example, you may need to have an insurable interest in that vehicle – like proof of ownership.

Insurable interest is any motivation you have to get insurance for a vehicle and keep it in good condition. Being the owner of a vehicle is considered an insurable interest.

If you’re not the owner, however, then proving insurable interest can be difficult. Generally, you can’t buy car insurance for a vehicle not registered in your name because you don’t have an insurable interest in that vehicle.

What’s insurable interest in car insurance? How do you prove insurable interest in a vehicle you don’t own? Keep reading to find out everything you need to know about insurable interest in car insurance and how it works.

Key Takeaways:

1. Insurable interest is the motivation to keep a specific property or person safe, and it’s a prerequisite for purchasing insurance for that entity.
2. Proving insurable interest in a vehicle typically involves showing proof of ownership, such as a car title or registration.
3. Most insurance companies won’t insure a vehicle not registered in your name due to risks like fraud and complicated claims.
4. If you lack insurable interest in a vehicle, alternatives include co-titling the vehicle, getting listed as a named insured, or purchasing non-owner car insurance.

What Is Insurable Interest?

Insurable interest refers to the idea that you have the motivation to keep a specific property or person safe. It’s a common term in the insurance industry.

If you were to suffer a loss if a piece of property is damaged or an individual is harmed, for example, then you have an insurable interest in that property or person.

Why Insurable Interest is Important

You can only buy insurance for something (or someone) if you have an insurable interest.

Before an insurer sells you a car insurance policy, for example, they may require proof you have an insurable interest in that vehicle.

Typically, you can prove insurable interest by proving you own a vehicle. Because you’re the owner, you would lose money if the car was damaged or destroyed.

If you’re not the owner of a vehicle, however, then it could be difficult to prove insurable interest. The insurer may require you to provide proof of insurable interest before they sell a policy. If you don’t have an insurable interest, then you cannot buy car insurance for that vehicle.

How to Prove Insurable Interest

The best and most effective way to prove insurable interest is to provide proof of registration or car title to your insurer. This proves you’re the owner of the vehicle.

As long as the name on the car title matches the name on the insurance policy, you should have no trouble establishing insurable interest.

If you’re unable to provide the vehicle’s pink slip or registration, however, then you may not be able to prove insurable interest – but you could still ask to get listed as a named insured, get the car a co-title, or buy non-owner insurance, among other alternatives.

The Challenges of Insuring a Vehicle Not Registered in Your Name

Typically, insurable interest plays a role in cases where you’re buying car insurance for a vehicle that’s not in your name.

If you’re trying to buy insurance for a vehicle registered under the name of a friend or family member, for example, then you could face a problem with insurable interest.

Here are some of the most important things you need to know about buying insurance for a vehicle not registered in your name:

• Most insurance companies will not issue an insurance policy for a vehicle not registered in your name. There’s a higher risk of fraud, a greater risk of a complicated claim, and other issues linked to this type of insurance.
• Some states prevent drivers from buying insurance on cars that are not registered in their name. Even if your insurer allows it and you have an insurable interest, you may be unable to purchase car insurance because of state insurance laws.
• If you can prove you have an insurable interest in a vehicle, and your state and insurer both allow this type of insurance, then you should be able to buy insurance for that vehicle – even though it’s not registered in your name.
• Even if you’re able to buy insurance for the vehicle, however, premiums could be expensive, and claims can be complicated.
• You could buy non-owner car insurance, but it works in a different way. Non-owner car insurance covers the policyholder’s liability when driving a non-owned vehicle (like a rental car). It acts as secondary insurance. It does not cover collision or comprehensive damage to the underlying vehicle.
• Alternatively, you could co-title the vehicle or ask to get listed on the vehicle’s insurance policy. Both of these tend to be easier than buying insurance for a vehicle you do not own.

Alternatives to Insuring a Vehicle Not Registered in Your Name

To insure a vehicle, you need an insurable interest in that vehicle. If you don’t own that vehicle, it’s challenging to prove insurable interest.

Although you may not be able to prove insurable interest, there are alternative ways to get covered, including:

• Option #1: Co-title the vehicle, adjusting the title to add your name as a co-owner.
• Option #2: Add your name to the policy as a named insured. If you live at the same house as a relative, for example, or frequently drive a friend or family member’s vehicle, it may be a good idea to list yourself as a named insured.
• Option #3: Buy non-owner car insurance, which acts as secondary insurance and provides liability coverage for any vehicle you drive (without providing collision coverage, comprehensive coverage, or any coverage for damage to the vehicle itself).

Final Word

Insurable interest is the concept that someone would lose something if a piece of property – like a vehicle – was damaged, lost, stolen, or destroyed. You have the motivation to insure that vehicle – like avoiding financial loss.

If you’re the owner of a vehicle, for example, then you’re motivated to keep the car in good condition because you want to protect your asset. You’re the owner of the vehicle, and you automatically have an insurable interest in the vehicle.

If you’re not the owner, then it’s difficult to prove insurable interest. Some states prevent you from buying insurance for a vehicle not registered in your name, and some companies disallow it. Instead, you can co-title the vehicle, get listed as a named insured, or buy non-owner car insurance.