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UPDATED: Mar 13, 2020
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Whenever you buy auto insurance, you are paying for coverage toward a certain vehicle. If the covered vehicle sustains damage as part of a covered accident, your insurance company will pay for the repair or replacement cost for your car up to the amount specified in your policy. This means that who is covered under your car insurance is largely determined by what vehicles you pay for and who owns those vehicles.
Depending on your household, you may need to add all of your resident family members as drivers to your policy. You may not be able to cover your children or other relatives under your insurance, however, if they do not live with you or you do not own their vehicle.
Resident Relatives and Car Insurance
Your car insurance company will assume that any individuals living in your home will have access to your vehicles. This means that the driving history, age and other demographic factors of your resident family members may have an effect on your insurance policy whether or not they really drive your car.
Most car insurance companies will extend coverage to anyone living in a household as long as the damaged vehicle is covered by insurance. This insurance follows the vehicle, and the ultimate financial responsibility for an accident lies on the vehicle’s owner. This means that if you allow someone to borrow your car and he hits a neighbor’s mailbox, you are responsible to pay for the replacement mailbox; the driver is not financially responsible for the damage.
Some car insurance companies handle this issue somewhat differently. The vehicle’s owner will always be responsible for damage the vehicle causes, but the insurance company may refuse to cover damage caused by a driver not listed on the policy. In this case, it’s imperative that you never allow someone to drive your car unless that person is on your insurance.
It’s always a good idea to list anyone who has frequent access to your vehicles as a driver on your policy. This way you know that any accident caused by that driver will be covered by your insurance. It also enables the driver to make a claim on the policy, which can be extremely helpful if you are ever injured or unable to handle your own claim.
If someone who lives in your household is not allowed access to your vehicles, however, you may be able to save money on insurance by excluding him or her from your policy. This means that the person’s driving history will not affect your rates, but it also means any claims caused by that person would be denied. Never allow anyone who is excluded from your policy drive your vehicle.
Non-Resident Relatives and Car Insurance
Some people may try to reduce their car insurance premiums by purchasing a policy in their parent’s name. Depending on the situation, this may actually qualify as insurance fraud, so you should be careful to ensure that you have the right to insure a vehicle before you agree to do so. In order to insure a vehicle, it must fulfill certain requirements:
- The car must be in your name, either as owner or co-owner
- The car must be primarily garaged at your house
- The primary operator of the vehicle must live at your home
- You must be financially responsible for that vehicle
This means that any vehicle you insure must be yours. You can share ownership of the vehicle with your adult children or other relatives, but you must maintain financial responsibility for the vehicle. Otherwise, your insurance company is not responsible for paying damage caused to that car.
Insuring a vehicle that you are not financially responsible for may be considered insurance fraud. You could lose coverage on that vehicle or have any claims denied.
In some cases, there may be some exceptions to this rule. For example, you may have children away at college in another state. In this case, the vehicle may be with them for the majority of the school year. You can let your insurance company know that this is the case; as long as your child’s permanent address is at your home, you should not have any difficulties with this.
If you have any questions about your car insurance, you should contact your insurance company’s customer service number or call your local agent. Your insurer should be able to guide you in your decision of who to allow on your policy and if there are any concerns with your coverage. By being honest with your company up front, you can determine the best insurance choice to suit your needs without any concern of a policy cancellation.