Auto Insurance Liability – Am I Covered Under My Policy?

Hello Everyone, 

I hope you are all staying cool in this weather! Summer has arrived. 

I wanted to take a moment and address something that has repeatedly come up in our agency over the past few months about auto insurance liability and the ownership of vehicles.  We are specifically discussing the ownership of the car, versus who is driving the car on a regular basis, and where the car may be insured on a policy. 

Here are a few real life examples that have occurred over the past few months:  

• Grandma lent her grandson her vehicle for a few weeks. Her grandson is in-between college graduation and taking a job in a city where he will not need a vehicle. Grandma makes his last few weeks at home much more enjoyable with him having a vehicle. Where does the coverage come from?  Is he covered driving the vehicle?

• A family member living at home purchases a vehicle in their own name. The policyholder (different name) calls to add the vehicle to their policy. Is the vehicle covered? Is the owner covered?

• Sons and daughters are driving their senior parents’ vehicles to help them go shopping and get to and from appointments. Are they covered? 

Like many things that happen in today’s world, there are more situations that come up that are not black and white, but gray.  When the language of the insurance policy is written in black and white, but the insured’s need for insurance coverage can become gray, it is helpful to know a few simple things and make sure that your insurance partners have all of the facts. Here are a few things to keep in mind to help explain the situations above and also help you have some direction with something like this in the future:

1.       The insurance coverage follows the ownership of the vehicle: The titled owner of the car is liable for bodily injury and property damage caused by that vehicle. If someone is driving your car, your insurance provides the coverage. There is language in the insurance policy that allows for a permissive user to drive the vehicle and the coverage will apply. A permissive user would be someone who does not have regular access to the vehicle but is driving it on a temporary basis.  Most carriers will say that the permissive use would end somewhere around the 30 day mark and that anyone using a vehicle more than that should be listed as a driver on the policy.

2.       Multiple vehicle ownership on the same policy: This is a situation that comes up frequently with different life events.  Examples might include different generations living together, a divorce or separation, or long term roommates.  The auto insurance wants to cover a named insured with one interest.  In the black and white perfect scenario, all of the vehicles and insureds live in the same household and all of the vehicles are titled in their names.  The gray areas come into play when one or both of these things do not exist.  If you have a scenario where vehicles might be garaged at different locations (kids/parents living separately, separation or divorce) or different interests on the same policy but living in the same household (parents/kids with vehicles titled in both names/roommates or life partners on same policy), we recommend a brief call to your agent to provide the details of the situation and formulate a plan to make sure the coverage is structured correctly.

In all of the examples above, there are countless scenarios where these tips come into play.  While the general ideas are good to know, there are so many things that come into play in the gray areas. Our advice is to always contact your agent and make sure they are aware of the situation. In turn and most importantly, your agent can contact the carrier’s underwriting if needed, and agree on the best solution to address the coverage. 

In general terms, if we remember that the insurance follows the vehicle and insurance coverage prefers to cover only one interest, it can help identify situations where additional information is needed to address coverage needs correctly.

Looking back briefly to our examples and applying the information:

• Grandma and Grandson: because it was permissive use and under 30 days, nothing needed to be done on the policy. We did call carriers underwriting and asked the question to confirm and they noted that on the account.

• Family member at home purchasing a vehicle: by far our most common and “grayest” area. In this situation, it was the son of an insured. If all family members are living in the same household, most carriers (but not all) will allow the vehicle to be insured on the parent’s policy.  Many other situations that fall into this bucket need clarity and require a call to the insurance carrier. Separation is different from divorce because you have one interest when separated but two when divorced.  Sometimes agreements stipulate that policies stay together after a divorce but others don’t. There are definitely concerns if you have a situation where a vehicle is on a policy with an owner that is not a named insured and does not live in the home. Those usually need to be addressed ASAP. Where one of the conditions exists it comes down to consulting your agent, getting good advice, and letting the insurance carrier know what is happening and agreeing to a solution.

• Son/daughter driving senior parents: this is a situation we come across frequently. In this case, the transportation was happening on a regular basis.  We consulted the insurance company and their recommendation was to add the children to the parent’s policy as drivers because of the regular “availability” of the car.

Life happens!  Keep us in the loop and we will do our best to protect you.

Stay cool out there.

Jon