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Short-term car insurance: here are your options

Short term car insurance isn’t necessarily a product that you can buy off the shelf from insurance providers. Instead you’ll have to opt for one of a few little workarounds. Let's explore your options for staying covered without a long-term commitment.

Option 1: Pay by fortnightly or monthly and then cancel

This is the most straight-forward option and the closest you can get to a true short-term policy, covering any car for the exact terms you want. 

How to make it work for you?

Essentially, you’ll be taking out your policy as though you’re ready to commit to the 12 months, but then you cancel once you no longer need the insurance. To pull this off successfully, you’ll need to set up fortnightly or monthly payments (rather than paying annually), and choose an insurer with little to no cancellation fees

Keep in mind though that premiums paid fortnightly or monthly are usually higher on a pro-rated basis than those paid annually. However, with cancellation fees ranging from $0 to $80, you can effectively avoid significant cancellation costs. Just be sure to thoroughly read the fine print.

Who is it good for?

This option is particularly useful for anyone whose car insurance needs are temporary and likely to change, since it allows you to keep the insurance for as long (or as short) as you want. For example, professionals who relocate temporarily for work assignments or those who purchase a vehicle for a short period, such as during a lengthy holiday.

Option 2: Take out pay-as-you-drive car insurance

Some car insurance providers offer a pay-as-you-drive option for those who don’t drive so frequently. This lets you grab a comprehensive level of cover for a smaller premium, considering you’ll be on the roads a whole lot less than the daily commuter.

How to make it work for you?

A pay-as-you drive policy lets you pay less for your insurance if you agree to drive less. So essentially, you will nominate the number of kilometres you plan on driving, submit an odometer reading, and then keep your kms below the nominated distance over the course of a year. However, it’s important to note that you could still be locked into an annual contract and be on the hook for a monthly fee, often with a minimum monthly charge to cover things like paying while it's parked, regardless of how little you drive. 

In other words, even if you only plan to drive 2,000kms a year, you'll likely be charged for much more than that. 

Who is it good for?

This solution is useful for those who only drive a particular car for a short time, but do so every year (or a little bit here and there throughout the year). For example, if you have a sports car that you only drive a few thousand kilometres each summer and plan to keep for several years, this option could be ideal for you.

Option 3: Use the car owner's policy

If you’re going to be driving someone else’s car, you might be covered under their existing insurance policy with their permission.

How to make it work for you? 

Check with the car owner to see if their policy covers you as an unlisted driver. Many insurance policies allow occasional drivers to be covered without being specifically listed, but this often comes with a higher excess in the event of a claim, known as an unlisted driver excess. 

If you plan to drive the car more regularly, it might be worth asking the owner to add you as a listed driver. This might increase the premium, but it typically results in a lower excess if there’s an accident and ensures that coverage is clear. 

Who is it good for? 

This option works well if you need to drive someone else’s car now and then, or just for a short while. It’s perfect for when you have the car owner’s clear permission, making sure that everyone understands the insurance coverage and that it’s all set for your driving needs.

Option 4: Hire a rental car

Sometimes, the easiest way to get temporary insurance is to rent a car. It’s simple, flexible, and comes with all the insurance you need, wrapped up in one neat package.

How to make it work for you?

When you rent a car, the rental company usually offers basic insurance. This will cover things like collision damage and theft, but you might want to add extra coverage for personal liability or the stuff inside the car. Just make sure you read the fine print so you know what's covered. If you already have a car insurance policy, give your provider a ring and see if it extends to rental cars. This could save you some cash.

Who is it good for?

This option is perfect for anyone who needs a car and insurance for a short time. It’s especially handy for travellers exploring a new city, anyone waiting on car repairs, or those heading to out-of-town meetings. Renting a car often comes with insurance included, or for a small extra fee, so you can hit the road without any fuss.

Summary of short-term car insurance solutions

To help make it easier, here’s a table highlighting the pros and cons of each short-term car rental option:

Who It's Good For
Pay fortnightly or monthly and then cancel
Set up a regular insurance policy and cancel when no longer needed.
Professionals on temporary work assignments

Individuals who buy a car for short-term use

Flexible duration

Closest to a true short-term policy

Higher premium on a prorated basis

Potential cancellation fees

Pay-as-you-drive car insurance
Insurance based on the number of kilometres you drive.
Infrequent drivers who still own a car (e.g., seasonal sports car users)

Lower premiums if you drive less

Comprehensive cover tailored to usage

Might still be locked into an annual contract

Minimum charges may apply

Use the car owner's policy
Be added as a listed or unlisted driver on an existing car insurance policy.
Individuals needing to drive someone else’s car occasionally or short-term

No need to set up a new policy

Can be straightforward if unlisted

Possible increase in owner’s premium if listed

Higher excess for unlisted drivers

Hire a rental car
Rent a car which includes insurance coverage.
Travellers needing a car temporarily

People whose cars are unavailable due to repairs

Simple and flexible

Insurance is easy to add

Can be expensive for longer periods

Basic coverage might need supplemental add-ons

Bottom line

Right now, there’s no cut-and-dry short-term car insurance option out there, so we've got to think a bit outside the box. While these alternatives aren’t the perfect fix, they do offer some clever ways to cover your bases in the meantime. No matter your situation, there’s always a workaround to help you manage until something more straightforward hits the market.

If you're looking for short- or longer-term car insurance options, be sure to compare policies.

Brad Buzzard
Brad Buzzard
Senior Money Writer

Brad brings over 25 years of experience in writing and consumer research to Mozo, using his RG146 certification for Generic Knowledge and Superannuation Brad has a knack for translating complex policies, to deliver practical guidance on financial matters. Brad has been featured in The Australian, B&T, Mumbrella, and Asia Insurance Review, and his insights have influenced the strategies of some of the world's biggest brands including McDonalds and Proctor & Gamble.