What Foreign Nationals Need To Know About Car Insurance in the US
Relocating to a new country can be incredibly exciting, and the future may seem bright, but purchasing car insurance in the United States as an expatriate isn’t always easy. There are 38 million or more expatriates living in our country, and driving is a necessity for most who need to work and perform everyday tasks like going to the supermarket. Unfortunately, for foreign nationals, insurance is required in almost every state, and obtaining car insurance is even more difficult than getting a car loan or lease.
The dual problem for foreign nationals who need car insurance
And it’s not just the state. Whether you lease or buy a vehicle, financial institutions will also require you to have auto insurance. Insurance rates depend upon many factors, but two large factors make it more expensive for expats:
- Driving history: Without U.S. driving experience, insurers consider expatriates new drivers – essentially the same as new teenage drivers.
- Credit history: Expats lack U.S. credit history too, which takes time to build. A good credit score can significantly lower a driver’s rates, and is also useful for obtaining insurance in the first place.
Not having these things makes obtaining insurance and affordable rates difficult, but not impossible.
Planning ahead to get insurance as a foreign national in the U.S.
Foreign nationals in need of car insurance can combat their disadvantages by researching and planning ahead. As far as driving history, your hands are pretty much tied until you establish a history by actually driving in the U.S. In most states, to register a vehicle, you’ll usually need a U.S. driver’s license and proof of insurance. There are a few states that will accept an overseas licenses or international licenses to register vehicles. But to obtain insurance, you’re usually required to have a U.S. driver’s license and to have your vehicle registered in your name.
Therefore, before making the voyage to the U.S., do a couple things:
- Make sure you have a driver’s license from your country before arriving, as it will help in applying for a U.S. license.
- Find out if the state you’re moving to requires U.S. licenses to register a vehicle.
There are also ways to boost and build your credit history in the U.S. prior to contacting insurers:
- Obtain a secured credit card, ideally with limits of $5K or more. Avoid unsecured credit card offers, and don’t apply for loans or store credit cards for at least six months. You’ll almost definitely be denied, but more importantly, multiple credit inquiries – particularly for large loans – are considered “hard hits” on credit reports and impact credit negatively, and that’s doubly detrimental when you’re trying to build positive credit history without having any to begin with.
- Obtain a mortgage from a lender specializing in helping expats, though you’ll likely need a down payment of 25 percent or more.
- Pay bills on time – and early if possible. Set up automatic payments via electronic funds transfer (EFT) to avoid late or missed payments.
- Lease a car initially rather than buying one, and do it through a dealer who has worked with expatriates before. They’ll report your payment activity to credit bureaus, which will boost your credit rating and reduce insurance premiums, as credit scores are an increasingly important factor in determining rates.
Expatriates shouldn’t be surprised if they’re denied car insurance when first arriving in the U.S. The key is finding professionals familiar with such circumstances that will work with you to get you on the road.