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Short-term car insurance: Is it worth it for you?

Paloma Kubiak
Written By:
Paloma Kubiak

Car insurance is no longer just bought on an annual basis and recently there has been a rise in short-term policies coming onto the market.

These policies come in all shapes and sizes, but they’re generally aimed at people who don’t own a car, but need a vehicle – and insurance – for a few hours, days or weeks.

With many, all you need is an app downloaded on your phone to buy insurance for the time you need.

You’ll need permission from the owner of the car, be it a friend, family member, or neighbor, and you’ll need to check the insurance details carefully before you set off.

Anna-Marie Duthie, insight consultant at Defaqto, says: “With the average price of a car increasing dramatically since the pandemic, borrowing a friend’s car for a one-off trip may be a better option.

“If you are getting short-term car insurance, it’s important to check the auto insurance coverage and what the policy actually covers.”

Why is short-term insurance becoming more popular?

The pandemic changed our driving habits leading to more people working from home and a prolonged period where no one was able to get out on the road.

The current cost-of-living crisis has also sent the cost of fuel and owning a car upwards. Petrol prices rose 11p in March while diesel surged by 22p a litre – the largest ever monthly increase recorded.

The cost of owning a car has also risen significantly since the pandemic. A shortage of new cars owing to production and supply issues, sent demand for second-hand cars soaring. As a result, some of the most popular cars, such as the Ford Fiesta, rose by up to 57% between 2019 and 2021.

Therefore, borrowing a car for a short period of time may be a cheaper option for many drivers, especially those who have decided to give up a car altogether.

Iain Hamilton, Aviva’s head of motor underwriting, says: “Short-term motor insurance is undoubtedly a growing market, and the need has been accelerated by the Covid pandemic which has changed the way people are living their lives: for example, smart working, where they are working partly from home and partly from the office.”

Data shows a 29% increase in people searching for short-term insurance policies between 2019 and 2022, according to MoneySuperMarket. The comparison site also saw a 143% rise in people visiting its short-term insurance page in this time.

Which drivers can use short-term insurance?

Anyone can take out a short-term car insurance policy, but it’s generally aimed at those who don’t own their own car who need to drive temporarily. This could be for a holiday, or for a one-off trip, for example.

There are also short-term policies designed just for learner drivers, some which last up to 28 weeks. This gives learners the chance to take out a policy while they are learning, instead of paying for an annual policy.

There are 20 insurance providers offering 60 short-term insurance products including Aviva, Collingwood Insurance, Cuvva, RAC and Marmalade. Of those, 31 are for short-term insurance and 29 are specifically for learner drivers.

How much does it cost?

The price you pay for any type of car insurance is dependent on a range of factors including, the age, profession, and experience of a driver along with the kind of car they have, what it’s used for, and where it’s stored.

However, it can cost an average of around £10 an hour for short-term insurance, £20 a day, and £60 a week, according to Defaqto.

With RAC, for example, you’ll pay on average £16 for an hour’s insurance, £28 for a day, and £92 for a week.

To calculate overall costs, it’s worth looking at how often you may need to pay for short-term insurance. As a one-off it may be cheaper than an annual policy but if you’re using it several weeks or months of the year, it’s unlikely to be cheaper. You’ll also need to factor in extras including the cost of an excess if you make a claim.

What level of cover is provided?

Most short-term policies offer fully comprehensive car insurance, the highest level of cover available. Some policies allow you to drive a car for leisure or business use too.

European cover and breakdown insurance are available from some insurers for an extra fee.

Are all cars covered?

It’s up to an individual insurer to decide which cars can be covered. The RAC, for example, states that cars must have a market value of £75,000 or less, not be hire or rental vehicles, not be leased under an agreement for 12 months or less, or have any engine modifications.

What to watch out for

Before you get behind the wheel, there are several things to check when it comes to short-term insurance. They include the following:

• How long you’re insured for: You will only be insured to drive the car for the time permitted. While most insurers allow you to add extra hours via an app, or online, if you haven’t done this and are driving the car uninsured you could be fined and/or receive points on your licence.
• Cancellation: If you cancel a policy you may not get the premium you’ve paid refunded, as unlike with traditional car insurance, there may not be a cooling-off period. Just six out of 31 policies allow drivers to cancel once cover has started.
• Level of cover: You may not get the same level of cover with a short-term policy. For example, 29 policies, out of 31, don’t cover windscreen damage – which can cost £400 or £500 to repair.
• Excess: The excess – the amount you will have to pay if you make an insurance claim
• – can be high. Six out of the 31 policies have a minimum excess of £500.
• Courtesy car: If you’re in an accident, a courtesy car is unlikely to be provided, unlike with traditional insurance.
• Speeding tickets and parking fines: If you’re borrowing someone’s car and you get a speeding ticket or parking fine, these are usually sent to the owner of the vehicle. It’s then up to them to confirm who was driving the car at the time.

What about the car owner’s insurance?

If you are borrowing someone else’s car, their policy and no claims bonus shouldn’t be affected as you’re taking out separate cover.

What are the best alternatives?

If you don’t want to take out a short-term policy, you could be added to another driver’s insurance as a named driver.

There are also car clubs, such as Zipcar, which let drivers borrow a stranger’s car on a temporary basis. You’ll usually pay a monthly or annual membership fee, of around £240 a year, and can then borrow a car for a short period. The cost of insurance and in some cases, petrol is also included. Car owners driving for less than six hours a week could save around £1,600 a year using one, according to the provider iCarhireinsurance.com.

You can also buy car insurance, and pay for it, by the distance you travel. The provider By Miles lets drivers pay for every mile they travel, alongside an annual policy, which can be a cheaper option if you don’t drive that much.