The driver is getting a little desperate.
With car insurance prices increasing by more than 50% in the past three years, it can be tempting to push the envelope when looking to lower your annual premium.
Digital insurance broker Jerry released a study last month that found 17% of respondents were more likely to give false information to their insurance company now that premiums are so high. 7% had already done so within the past 12 months.
As I documented last week, parents of new drivers are fed up with annual bills that can exceed $20,000. And some of them wrote to try out two money-saving strategies.
The first suggestion was to simply not tell the insurance company about the newly licensed teen, on the theory that the insurance company would cover the child if an accident occurred.
Second, it would probably be cheaper to put the car in the teenager’s name and have the new driver insure it.
So what happens when you try these strategies?
Should I list my teen driver on my insurance policy?
Yes, you should.
The reader’s confusion on this subject may come from the fact that you are allowed to rent out your own car, and insurance usually comes with the car (although if you rent out your car, (If the driver has insurance, that insurance may also apply.) (in the event of an accident).
So why not just “loan” your car to your new teen driver every time he needs to use it and avoid listing it on his insurance policy?
First of all, your policy may prohibit it with a misrepresentation clause.
“Coverage may not be available if material facts are intentionally concealed or misrepresented during the application, coverage period, or claims process,” USAA spokesman Andrew Femas said in a statement. ” he said.
I’ve found no evidence of anyone being convicted of insurance fraud for something like this, but you probably don’t want to verify that.
“If your child is driving, why don’t you tell your insurance company,” said Loretta Waters, a spokeswoman for the Insurance Information Institute. “If you’re trying to save money and trying to hide it, that’s dishonest, isn’t it?”
Should teen drivers have their own insurance and own a car in their name?
It’s worth just checking the price before renaming a car in your teenager’s name. But even if a new driver’s coverage is lower than an adult’s, you may not like what you get.
“Teen auto insurance is the most expensive insurance on the market,” said Mark Friedlander, a spokesman for the Insurance Information Institute. If a company were to cover just one teenager, it could cost up to four times as much as adding a new driver to a family policy, he added.
Cost aside, wealthy parents may find it a good way to protect themselves and their assets from legal liability. If this is also part of your rationale for deploying this strategy, please consult your attorney first.
What would the lawyer suing you say?
Insurance is protection against risks.
But risks come in many forms, and in this case it’s worth considering what will happen if you don’t tell your insurance company about your new driver.
Let’s say your teenager gets into an accident and someone else is seriously injured. First, your insurance company could file a lawsuit against you (parent or parent) and your teen, and because of your misrepresentation, the insurance company’s coverage won’t cover you, and the victim will lose you. claim that it is of no use in protecting the Stephen Skinner, an attorney in Charles Town, West Virginia, said you can fight, but you can also lose.
“The question then becomes whether parents are responsible for what their children do in their parents’ cars,” he says. “And in most states, if the vehicle was used with a permit, it definitely will.” A judgment encircling your property can follow.
What does the insurance company say about this?
There are very few.
I had expected more insurance companies other than USAA to discuss these issues, but Geico, State Farm, and Travelers referred me to their industry associations for comment. State Farm spokesman Justin Tomczak said these are “industry-wide questions” and people should contact the organization.
Most consumer affairs questions are industry-wide questions. But in most cases, my bank won’t refer me to the American Bankers Association, and my mortgage lender won’t refer me to the Mortgage Bankers Association.
But the insurance industry has been doing this consistently for years. why? None of them tried to answer that question.
However, Geico’s customer service representatives are happy to answer any questions customers may have. My colleague Tara Siegel Bernard spoke to an agent and was told that once her older child gets her license, she needs to be listed on the policy. After all, the company has access to data on new drivers from each state’s Department of Transportation, so a representative told her that they would eventually find out if she tried to hide her son from view.
Geico confirmed that its representative was correct. Insurers regularly receive new driver information from states and have done so for decades, said Robert Passmore, vice president of personal affairs at the Property Casualty Insurance Association of America.
It’s not in anyone’s interest to be confused about how insurance works. And it would be very helpful if the insurance companies themselves were more willing to talk about the rules.
Tara Siegel Bernard contributed reporting.
