“KIDS AND CARS”* – LOTS OF MONEY, LOTS OF LIABILITY
Your daughter or son is getting or has gotten their license. It is a very exciting, but nerve- racking time. The Driver’s Ed process they need to go through is very rigorous and, I believe in general, young people come out as much better drivers than when I went through the process. However there is no denying the numbers. Inexperienced drivers have more accidents than experienced drivers, and therefore pay the higher premium. Planning is key because in MA, you are considered inexperienced for 6 years.
All licensed drivers, whether related or not, that live in the household or regularly use a vehicle must be listed on your auto policy. How they are listed will determine the premium.
-If they have their own auto policy, they can be listed as “deferred” meaning they are rated on their own auto policy. Because they are rated on their own policy, there may be no charge or a very small charge on your policy depending on the company. It is very important to still list the deferred driver because if they borrow or move a vehicle and a claim happens, the company can legally deny the claim.
-If the inexperienced driver owns their own vehicle, they need their own insurance policy in their name. If they are still living in your household, you must still list them as deferred and they need to list you on their policy also as deferred. The inexperienced driver will be the principal driver on their policy. This is the most expensive auto insurance. The cost will vary by driving record, type of vehicle and where it is garaged.
-If the inexperienced driver lives in your household and is driving a vehicle owned by the parent, there are two scenarios. If there are two parents and one child who is inexperienced, then there are three drivers. If the household has two vehicles, then the inexperienced driver will be listed as an occassional driver. If there are three vehicles and three drivers, then the inexperienced driver will be listed as a principal driver. An occassional driver is less expensive than a principal driver. Some companies allow you to assign the driver to a particular vehicle, some companies blend the rate for all vehicles and some companies will assign the most expensive driver to the most expensive vehicle. So you do need to compare companies.
-If the inexperienced driver goes away to school, they still need to be listed as a driver on the parent’s policy. You don’t want to remove them and you do not want to exclude them. If they borrow a vehicle and drive to get a pizza, as long as they do not regularly use that vehicle, in case of an accident, some coverage will come from the borrowed vehicle policy, but some coverage also can come from the parent’s policy. The parent’s policy can also cover some instances where the student is just occupying the other vehicle.
-Lastly what if the inexperienced driver/student takes the vehicle away to college? Remember the cost to insure will vary by driving record, type of vehicle and where it is garaged. The garaging is determined by Town which has territory ratings based on accident experience – usually the more cars, the more accidents. Being Massachusetts, the hierachy is confusing. The lowest premium rated territory is a 27 which belongs to towns such as Chatham, Brewster or Orleans. The ranking then moves to 1 up to 45 (excluding the 27). Harwich is a 1. So people who have primary homes in these 27 or 1 ranked territories, enjoy the lowest ratings for their cars being garaged there.
But if the student takes the vehicle to say, UMASS Amherst, that territory will change to a 5. Let’s say they take a vehicle to Northeastern University which is in Boston Central, the territory will jump from a 27 or 1 to a 23. If it goes to an out of state college, the territory will be a 9. If you don’t let the company know the garaging has changed, claims can be denied. The company was rating the premium based on Chatham, but the likelihood of an accident in Boston Central definitely carries a higher risk and they need to charge for that risk.
-Ways to mitigate the cost of keeping your son or daughter listed on your policy are endorsements. Most companies have Student Away endorsement if the car remains home or Good Student endorsement if garaged either home or away will make a sizeable differences in premium.
As far as insurance limits for the inexperienced driver, we always recommend that if living in your home, they should have the same limits as the parents. If the child injures someone in an accident, any court award is active for 20 years which can affect this then adult’s earnings.
If the parents have a Personal Umbrella or Excess policy over their home and autos, each company will specify what limits are required for inexperienced drivers and surcharge for them. Not meeting those limits leads to a gap in coverage. .
One of the most asked auto questions we get is “should the car be registered in the parent’s name or in the child’s name?” Here is what the Massachusetts law stipulates:
If the inexperienced driver is under 18 and not emancipated, parents will be liable for any willful act committed by this child up to a limit of $5000.
If the inexperienced driver/child gets into an accident and causes damage, there is no responsibility on the parent other than the policy limits, no matter who bought the car or who pays for the insurance. The only time there would be parental liability is if the child borrowed the parents car to run an errand for the parent.
If the child lives on their own and the vehicle is in their name, no liability will follow the parent.
Not all states have the same laws as MA. But is it prudent to put the vehicle in the child’s name? …. YES. That can be the more expensive insurance option, but it does give a degree of separation.
*Title “Kids and Cars” from MAIA Q&A