How to insure a vehicle in the US as a non US-resident

Introduction

Ready to ditch the rentals and buy a vehicle in the US?

You'll need auto insurance. Not only is it legally required, but it gives you peace of mind so that you can enjoy your visit to the US.

This is an article about insuring a vehicle in the United States, written for tourists, travelers, foreigners - anyone who doesn't live in the US, but wants to buy, own, and drive a vehicle here.

There are five things you should consider when planning to insure a vehicle in the United States:

• Agents,
• Insurers,
• Address,
• Coverages,
• Policy period,
• Documenting your LLC (if you use visitor.us), and
• visitor.us' role in your insurance.

Let's jump right in.

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Agents

The US auto insurance industry is set up to serve drivers with a US driving history and credit score, whose vehicle generally spends every night at the same address.

In other words, the US auto industry is not built for international travelers.

Having an agent that knows how different insurers and policies work with international drivers can mean the difference between the insurance company honoring or denying any claim that you might need to make.

visitor.us is not a licensed insurance agent, so we can't provide policies directly. However, we have a great partner that can.

With more than 30 years of experience insuring international drivers in the US, Thum Insurance is that agent.  

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Insurers

If you’re buying a vehicle as an international visitor to the US, you probably don’t have a US driver’s license.

There are a few high-quality auto insurers that don’t require a US driver’s license.  Those insurers are:

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The easiest way to start researching coverages and prices is to play around with the quote engines at those websites.

You might find that some of those insurers’ websites are not accessible from outside of the US.  Using a VPN would be one way to solve that.

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Address

The first thing an insurer will ask for is your address.

For us Americans, that’s easy - 98% of the time we provide our home address.

For international visitors traveling around the US, the address question can be a bit unclear, so let's discuss the fundamentals.

Insurance is a regulated service. And in the US, there is no national insurance regulator. Insurance is regulated by the US states.

So US insurance policies are issued in one US state or another. And US auto insurance policies issued in any US state are valid in all US states and territories, as well as Canada.

Question: In which US state should an auto insurance policy issued?

Answer: In the US state in which the risk mostly occurs.

US auto insurers determine where the risk mostly occurs by asking for the vehicle's "garaging address," or where the vehicle is normally kept overnight.

I can hear you now: "But I'm going to be on a road trip - I'm not going to be anywhere normally."

If you want to buy a vehicle in the US, these are the rules of the game.

You might use a friend or relative’s address - because the policy will be in your name, not theirs, your actions won’t impact their insurance history.

Some insurers accept AirBnB addresses and even hotel addresses.

‍The right address to provide is one where the vehicle will actually spend time. 

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Using visitor.us' Address (Don't Do It)

If you hire visitor.us to register your vehicle, you may be tempted to provide our address for for your insurance policy. Our terms of service prohibit using our address for insurance purposes, unless specifically instructed by a licensed insurance agent. (Using our address as the mailing address for your insurance policy is fine.)

The reason for this is simple: we don't want your insurer to deny any claim that you might have because you list a garaging address where your vehicle won't spend any time.

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Full-Timer Coverage

If your vehicle is a motorhome, you may be eligible for 'full-timer' coverage, which is designed to cover people who live in their RV's full time.

Because the insurer understands that full-timers don't have a fixed address, they are usually more flexible about address requirements.

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Exceptions

Because insurance is regulated by the US states, each insurer has a different set of policies for each US state.

This creates exceptions.

For example, while Progressive doesn't generally require a US driver's license, their New York State policies mostly do require a US driver's license.

Massachusetts is also a tough state for auto insurance. If you take out a Massachusetts auto insurance policy and don’t register your vehicle in Massachusetts within 30 days, your policy will be canceled automatically.

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Coverages

Generally, there are two types of auto insurance:

• Liability, or third party, insurance, which is legally required to drive
• Comprehensive and Collision, or first party, insurance, which is optional (but recommended)

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Liability (third party) insurance

Liability insurance protects you financially if you're responsible for injuring someone else, or damaging their property.

Liability insurance is legally required to drive a vehicle on public roadways.

Examples of things that auto liability insurance covers include

• Injuries you cause to someone else while driving,
• Damage you do to someone else's vehicle while driving,
• Damage you do to someone else's property, like a fence or a garage, and
• Legal expenses for accident-related lawsuits.

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Liability insurance comes with pre-determined limits, which are the maximum that the insurer will pay.

You are responsible for any damage or injury that you cause over your liability insurance policy's limits.

Most auto liability policies have limits that are expressed as follows:

          $50,000 / $100,000 / $25,000

Where those numbers mean the following:

• Bodily injury liability per person: $50,000 is the maximum amount your insurance company would pay out for injuries you're liable for, per person,
• Bodily injury liability per accident: $100,000 is the maximum amount your insurer would pay out for injuries you're liable for, per accident.
• Property damage liability per accident: $25,000 is the maximum amount your insurer would pay out for damage to someone else's vehicle or property you're liable for, per accident.

visitor.us recommends auto liability limits of $100,000 /$300,000 / $100,000.

If you would feel more comfortable with higher insurance limits, you might consider an umbrella insurance policy, which provides excess liability coverage, usually up to $1mln or more.

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Collision and comprehensive (first party) insurance

Collision insurance can pay to repair or replace your vehicle in the event of an accident with another vehicle or a stationary object.

Comprehensive insurance can pay to repair or replace your vehicle in the event of unexpected damage that's not caused by a vehicle collision, such as theft, vandalism, fire, flood, and falling items.

Neither collision nor comprehensive insurance are legally required in any US state. But they are a good idea to have.

Both collision and comprehensive insurance coverages are subject to a deductible (known as "excess" in other parts of the world), which you must pay before your insurance coverage kicks in.

Standard deductibles are $500 or $1,000, although you may raise or lower them to achieve your preferred mix of cost and coverage.

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Other coverages

Roadside assistance covers costs such as towing your vehicle to a service station, jump-starting your vehicle, locksmith services, and help changing a flat tire.

Uninsured motorist coverage can pay to repair or replace your vehicle if it is struck by an uninsured vehicle, or in a hit-and-run accident where the other driver is not identified.

Underinsured motorist coverage can pay to repair or replace your vehicle if it is struck by a vehicle whose liability insurance is insufficient to cover the damages to your vehicle.

Depending on your state, your insurance company may offer other coverages, such as medical payments or personal injury protection coverage.

Our advice on other coverages is straight-forward: better to have and not need, than need and not have.

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Policy period

A typical US auto insurance policy lasts six months, and a typical RV insurance policy lasts 12.

Your insurer may offer you a monthly payment option; a 10% discount for paid-in-full is standard.

You can cancel your insurance policy at any time and receive a refund of your unused premium, less a fee (usually 10% of the unused premium value).

You should also know that insurance agents get rewarded for policy renewals and penalized for policy cancellations.

So if the agent that you speak with declines to offer coverage after you tell them that you only want a two-month policy, don’t be surprised.

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Documenting your LLC

If visitor.us registers your vehicle, the Montana Limited Liability Company that you own will own your vehicle.

So what’s the best way to document this with your insurer?

Some people are tempted to take out a commercial insurance policy, but this isn’t the right answer.

The activity a vehicle is used for - not its ownership - dictates whether a commercial or personal insurance policy is appropriate.

For example, if an American has an auto insurance policy that supports ride-sharing, his policy becomes a commercial policy the second he logs in to the Uber app as a driver - even though he still owns the vehicle as an individual.

So activity, not ownership, dictates whether to get a commercial auto insurance policy.

Since you probably won’t be driving Uber or making deliveries, a personal insurance policy, not a commercial insurance policy, is usually appropriate.

So how to document your Montana company on your insurance policy? It’s actually pretty straightforward.

If I buy a car with a loan from Bank of America, Bank of America technically owns the vehicle, and is furnishing it to me for personal use.

I document this arrangement with my insurer by listing Bank of America as an “additional insured interest” on my vehicle’s policy.

The same same arrangement happens when you own a vehicle through an LLC: your LLC technically owns the vehicle, and is furnishing it to you for your personal use.

Document your Montana company's ownership of your vehicle by adding your Montana company as an Additional Insured Interest on your auto insurance policy.

People use loans to buy vehicles all the time, so insurance companies make it super easy to add an additional insured interest when buying a policy.

You can even add an additional insured interest to a policy that’s already in place.

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Conclusion

If you want to buy a vehicle in the US - and legally drive it on public roadways - you'll need liability (third party) insurance.

And you'll probably want collision and comprehensive insurance to cover against damage to your vehicle.

The key thing to remember when you're shopping for a US auto insurance policy is that insurance is regulated by the US states, not the national government.

We Americans (stationary Americans, anyway) don't have to think much about this: we take out an insurance policy in the state in which we live.

But if you're an international visitor that doesn't live in the US, figuring out the US state in which to take out an insurance policy will take a bit more thought.

Once you've decided the state in which you'll take out your insurance policy, find an insurer that doesn't require a US driver's license (if you don't have one) and choose the coverages that you feel most comfortable with.

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If you’d like to keep learning, please check out the following resources:

• How to buy a vehicle in the US as an international visitor
• How to register a vehicle in the US as an international visitor

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Thanks for reading!