Complete guide to car and auto insurance for expats and foreigners 2024

If you’re planning to buy a car in the US, you’ll also need to buy auto insurance to legally be on the road. You might be wondering what types of car insurance there are, the bare minimum auto insurance coverage you need, how much car insurance in the US costs, how to purchase car insurance as an expat or foreigner, how you can get discounts on your auto insurance rates, and generally–how it all works!

There’s much to know about purchasing car insurance as an Australian expat in the United States, and quite a few differences compared with buying auto insurance in Australia. So we’ve compiled everything you need to know when you’re buying car insurance in the US. Grab a notepad and pen, settle back, and read on!

Do I Need a US Drivers’ license to Buy Auto Insurance?

Generally speaking? Yes.

State Laws, Residency, and Drivers’ licenses:

That’s because every state has different laws on whether you need a US drivers’ license to legally drive, insure, and register your vehicle. So that’s why you should consult the motor vehicle department of each state you’ll be driving in to find out specific requirements.  

For instance, many states require you to get a US drivers’ license within a certain time frame, once you’re considered a resident of that state. For example, in New York you’re required to get a New York state license within 30 days of becoming a resident. Also in New York, you can get a driver’s license without a social security number.

Auto Insurance Limitations Without a US Drivers’ license:

Even if you’ve done your research and aren’t legally required to get a US driver’s license, be aware that some insurance companies won’t offer you auto insurance without one. This is because they’re unable to verify your driving record and aren’t willing to take on an unknown risk. Also it means that the insurers that will offer you a policy, will quote you a much higher premium. 

Also, if you’re thinking of getting an international drivers’ license to visit or work in the United States, chances are you probably don’t need one–and here’s why.

Consequences of Not Complying With Drivers’ license Laws:

Finally, be aware even if you know someone who got auto insurance without a US drivers’ license, it doesn’t mean they are legally compliant, for the reasons outlined above. If they have an accident, it could mean they’re not covered by their policy and instead could be liable for damages. That’s because a review of the drivers’ legal compliance is part of the insurance claims process. So a failure to comply with any part of the law associated with being on the road, can be the basis of a claim being denied.

This means the onus is on you to ensure you comply with US drivers’ license requirements. You can find out how to get a NY drivers’ license here. Or if you’re in another state, check your local DMV for further instructions.

What Are the Basics About Auto Insurance?

Firstly, auto insurance requirements vary by state, and you can read more about that below.

Secondly, it’s mandatory to buy car insurance to register your vehicle.

Next, most auto insurance policies are quoted and sold as a 6-month policy. This differs from Australia, where car insurance is generally quoted and sold as a 12-month policy. So keep that in mind as you’re comparing costs!

Finally, be sure to keep your insurance card in your car’s glove compartment. If you’re pulled over by police you may be asked to show it, or if you’re in an accident, you’ll need it to swap car insurance details with the other parties.

How Do Auto Insurance Laws Vary By State?

The minimum auto insurance you need–both the type and the amount of coverage–differ by state.

Most states require you to take out basic auto liability insurance. This is the minimum car insurance you need to legally be on the road. It generally includes damage to another vehicle or someone else’s property, as well as bodily injury to another person, for when you are the at-fault driver.  The minimum level of coverage also varies by state.

Also, some states require you to take out extra types of coverage, such as uninsured and underinsured coverage.

As well as that, if you’ve purchased your vehicle with a car loan, your lender might require you to buy comprehensive auto insurance as a term of the loan.

Finally, you can also purchase additional types of auto insurance and buy extra coverage about the minimums required, for peace of mind.

What Types of Auto Insurance Can I Buy?

Here are some of the common types of car insurance:

Liability Car Insurance

Liability car insurance covers two categories:

Bodily Injury Liability protection (BI):

This applies to medical expenses to injured parties if you are at fault. It’s similar to what we call Compulsory Third Party (CTP) or Green Slip insurance in Australia.

Property Damage Liability protection (PD):

This applies to property damage to vehicles or property other than a vehicle if you’re at fault. For instance, it includes damage to the other party’s car, damage to a fence. It’s similar to what we call third party property insurance in Australia.

Personal Injury Protection (PIP): 

Some states require you by law to take out PIP, which the driver and passengers in the policy holder’s car for medical treatment, and can also include lost wages, and funeral costs.

Uninsured (UM):

This covers you, a member of your family or designated driver, if you suffer damages from a hit-and-run, or uninsured driver. It also covers you if you’re hit as a pedestrian. Generally it includes both bodily injury and property damage, though you should check your state’s requirements and your policy details.

Underinsured Motorist Coverage (UIM): 

This works similar to UM and it applies when the other driver doesn’t have enough coverage to reimburse the full amount of your damages.

Collision Coverage: 

This type of auto insurance covers damage to your car in the event of a collision with another vehicle, object, rolling over, or from potholes. It’s generally sold with a deductible which applies to the claim if you’re at fault.

Comprehensive Coverage: 

This type of car insurance covers theft and damage to your vehicle that occurs by something other than a collision, such as a hailstorm or hitting an animal. Plus some policies include windscreen damage. It’s usually sold with a deductible.

What Is The Minimum Type and Amount of Car Insurance I Need to Buy?

Most states require you to take out Liability Insurance (BI and PD) as a minimum although the minimum liability limits vary by state. Some states also require you to take out additional insurance, such as UM and UIM. So if you want to know the minimum requirements for each state, you can find them here:

Minimum Liability Insurance Limits:

The minimum liability limit is expressed as: BI per person/BI per accident/PD per accident. 

It can be expressed in either the full amount: 25,000/50,000/10,000, or in shortened form: 25/50/10.

For example, if the minimum liability limit is 25/50/10, it means your auto insurance policy needs to cover as a minimum:

• $25,000 BI per person, 
• $50,000 total BI per accident, 
• $10,000 PD per accident. 

The first 2 numbers (25/50) mean that, if 2 people are injured, the policy covers another $25,000 for BI after the first person.

Comparison of Minimum Liability By State:

Let’s compare the minimum level of auto insurance you need to drive in 3 states:

In New York by law you need BI & PD, PIP, UM, UIM, with minimum BI & PD coverage of 25/50/10, plus wrongful death coverage of 50/100.

Whereas, in California you need BI & PD Liab,  with minimum coverage of 15/30/5, with Low-cost policy limits for low-income drivers in the California Automobile Assigned Risk Plan .

Lastly, on the extreme end of the spectrum, in New Hampshire you need FR (financial responsibility) only, meaning that  insurance is not compulsory and instead you need to show you’ve got “sufficient funds” to cover the cost of an at-fault accident.

What Additional Auto Insurance Coverage Do I Need if I Have a Car Loan?

If you purchased your vehicle with a personal loan, your lender may also mandate collision and/or comprehensive insurance as part of the loan terms. This protects both you and the lender from financial losses, in case the car is damaged in an accident. 

If you took out a personal loan to purchase your vehicle either through a dealer or a 3rd party lender, they should have disclosed the insurance requirements to satisfy the loan conditions. 

How Much Extra Auto Insurance Coverage Should I Buy?

In addition to the minimum auto insurance liability set by your state (and lender requirements if you have a car loan), you also have the option to buy extra types of coverage as well as increase the coverage limits above the minimum.

This really depends on personal factors and what you are willing to pay for peace of mind.

For instance: 

• How old your vehicle is. The rule of thumb is that if the cost of full coverage exceeds 10 % of the “blue book” value of your car, then collision or comprehensive is probably not worth it.
• What level of savings you need to pay for extensive car repairs or replace it completely, in the event of an accident.
• Whether or not you have health insurance, and if you do, how extensive it is. 
• Your level of comfort with paying upfront insurance premiums vs the risk of financial losses in the event of an accident.

What Factors Affect the Cost of Auto Insurance?

Each state evaluates different factors to determine the cost of your car insurance rates. There are mnay factors that affect your auto insurance premiums including age, gender, car make and model, driving record and accident history, credit score.

You can get a good idea of average car insurance costs by state, and by a breakdown of many of these factors here.

Let’s look at two factors that affect your insurance premium as an Australian expat in the US:

US Driving Record and Accident History:

If you’ve got zero US driving history, your premium could be up to 20 % higher. This isn’t because Aussies have a reputation for being bad drivers (as I often tell my US friends, I’ve never had a collision with another car, only kangaroos). But rather, it’s because you’re an unknown risk to an insurer, safety wise, so they’ll increase the premium to compensate.

Is there any way around this? Maybe!

According to Expat Ride, if you’ve got a good driving record back home, i.e. no accidents, no claims, it’s worth checking with your insurer to see if they’d be willing to discount your premium, if you provided a transcript of your driving record. 

On the other hand, anecdotal sources say that your overseas driving experience probably won’t transfer. 

If you do have a US driving history, your auto insurance rates will be higher due to DUIs, speeding tickets, at-fault accidents, driving without insurance, and other violations, particularly over the previous 3 years.

So it goes without saying, for your safety as well as for the benefit of lowering your insurance premiums, to establish and maintain an impeccable driving record. Another reason this matters is because after your first 6 months holding an auto insurance policy, you should request a revised quote. This is because your rates should go down if you’ve demonstrated a safe driving record.

Make and Model of Your Vehicle:

If you’re reading this and you don’t own a car yet, take note of this when choosing a vehicle. That’s because a newer, more prestigious or unique vehicle, particularly one that’s under finance, means a higher car insurance premium. Whereas an older vehicle, one that’s a common make and model, particularly one you could purchase with cash, means a lower premium. So if you have zero or limited US driving history, you can use this information to inform your car purchase.

How Does a Poor Credit Score or No Credit History Affect My Car Insurance Rates?

Some states, though not all, take into account your credit score when calculating your auto insurance rates. This is because a poor credit score is correlated with more frequent claims and costlier claims. 

So if you’ve got no credit history or a poor credit score, you should take steps to establish a credit history and build your credit score.

How Do I Get a Discount On Auto Insurance Premiums?

The types of discounts for when you’re buying auto insurance vary by insurer, but some of the common ones include: being a safe driver, loyalty, bundling your auto with other insurances, defensive driver training, safety devices, and anti-theft devices.

Let’s look at some auto insurance discounts that apply to an expat buying car insurance in the US:

Discounts for Being a Safe Driver: 

Many insurers offer you a discount for maintaining a driving record free of accidents and claims, typically based on your last 3 years. Anecdotally, some expats who’ve requested a new quote after 6 months of incident-free driving have reported getting a lower rate, so it’s worth contacting your insurer each time you renew your policy.

Discounts for Defensive Driver Training:

The requirements vary by state, but generally getting this discount requires you to sit an approved training course. During the pandemic, many of these are being offered virtually. It takes just a few hours of your time, costs anywhere up to $100, and you can save 5-20% up to on your auto insurance. Defensive driver training is offered by insurers and through state-based organizations, and you find more details here.

Discounts for Safety Devices:

This includes anti-lock brakes and airbags. If you’re about to purchase a vehicle, knowing about safety device discounts could inform what kind of car you choose.

Discounts for Anti-Theft:

This includes factory-installed as well as modifications, so if you’ve installed any safety or anti-theft devices since you bought your car, be sure to notify your insurer to see if you’re eligible for a discount.

Who Should I List on My Policy?

When you buy auto insurance, generally the drivers you must list on the policy includes all the licensed drivers in your household, who are related to you (by blood, marriage, adoption), including fully licensed teenage drivers, and anyone outside your household who will regularly drive your vehicle.

Teen Drivers:

If you’ve got teens who have their learners’ permit (cue Dad jokes about parental anxiety!), you might be tempted to leave them off the policy to“save” money on your auto insurance premium. 

However, keep in mind that in the event of an accident, your insurance policy is exactly what protects all covered parties from costs of damages and injury. And with a teen driver you don’t need any more stress! (cue more Dad jokes). So you should always disclose if your teen on a learners’ permit will be driving the vehicle, even though not all insurers require them to be listed. 

In any case, your insurer will usually ask about teen drivers. Plus they can also guide you about increasing coverage or other options if you teen doesn’t live with you full-time.

Visitors Who Will Be Driving Your Car:

If you’ve got visitors who will be driving your car, you should contact your insurer. This is so that they can advise whether your car insurance policy already covers a visitor (many do), if you’ll need to take out additional cover for the duration of their visit, or if they just need to be listed on your policy. 

How Do I Compare Auto Insurance Quotes?

To compare policies and quotes, you can go directly to the insurer’s site, use a comparison tool, or use an agent or broker. 

List of Auto Insurance Providers For Your State:

Many state government websites list auto insurance providers in their state, for example New Jersey, New York. Some also have comparison tools, and lists of agents and brokers, such as California.

The bulk of auto insurance in the US is sold by the 10 largest auto insurance companies. If you don’t hold a US drivers’ license, most of the major insurers won’t sell you a policy online. If this is your situation, you can find car insurers that do sell policies online to foreign drivers here.

Car Insurance Comparison Tools:

Online auto insurance comparison tools can help research insurance quotes. One comparison tool that offers specific car insurance advice to expats is Insurify. Other common comparison tools are The Zebra, and NerdWallet. 

Insurance Agents or Brokers:

An agent represents a particular insurer or set of insurers and can set up a policy for you. They can help once you’ve chosen an insurer and particularly if you need custom advice.

Where as a broker is independent so they can help compare insurers and get unbiased advice.

Insurance Providers for Expats:

Finally, here are some expat auto insurance services: Expatride, Clements Worldwide. NB: These are listed for information purposes only. We don’t endorse any of the services so be sure to do your due diligence.

Do I Need Auto Insurance When I’m Renting, Leasing, Car-Sharing, Leasing, Renting or Borrowing?

It’s complicated!

Auto Insurance When Renting a Car:

When you’re renting a car, generally you’re given the option to purchase a loss damage waiver, and other protection products. However a damage waiver isn’t insurance, rather it waives your responsibility for loss or damage to the rental vehicle only. 

In the event of an accident, your rental vehicle or other parties might be covered by your personal auto policy, and in some cases if you’ve used a major credit card to pay for the rental. But you need to check the fine print for what is covered. You can find out more here.

Car Insurance When Leasing a Vehicle:

If you’re leasing a car, your leasing company will generally require you to take out collision and comprehensive, in addition to the minimum mandate coverage for your state. 

There’s also an option to purchase Guaranteed Asset Protection (GAP) Insurance, which covers the difference between how much you owe on your car, and how much your standard car insurance policy will pay in a claim. 

Check the fine print with your leasing company to determine what’s required and what’s included within your leasing agreement.

Auto Insurance When Sharing a Car:

The question of auto insurance coverage when you’re car-sharing gets a little trickier. 

With car sharing services, such as Zipcar, your rental will mostly likely include the minimum level of car insurance in your state. 

However for peer-to-peer car-sharing schemes, such as Turo, the car you’re renting is owned by another consumer, and potentially the driver, the vehicle owner, and the company running the service, are all liable for damages in the event of an accident.

So whether you need to take out auto insurance or additional coverage, depends on the details of the agreement, as well as if you have an existing car insurance policy. Caveat emptor and do your research, especially if you’re a vehicle owner or driver who needs auto insurance coverage in peer-to-peer car-sharing.

The Final Word on Buying Auto Insurance in the US For Expats and Foreigners

There’s a lot involved in purchasing car insurance. So if you need to know more, the Insurance Information Institute has some good resources for learning more about the fundamentals of buying auto insurance in the US. 

It also might seem very costly to buy auto insurance in the US as an expat. But ultimately it’s designed to give peace of mind to drivers and their passengers in the event of an accident. 

So auto insurance is one of those things that you won’t know exactly how helpful it is until you need to make a claim. Which hopefully you won’t. Safe driving everyone!

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