Family Members: What You Auto Know

From the beginning, car insurance companies knew that people living in the same home would often share the family vehicles. Whether this be children living in the home who just got their permit or other family members, insurance policies are designed to not just provide coverage to the person named on the policy but also family members.

The problem that we get into is what happens when a family member uses a vehicle that is not specifically covered by your insurance policy. While this restriction may not apply to you or your spouse, a family member who is not listed as a driver on your policy could find themselves without coverage if they are involved in an accident using a vehicle that is not covered by the policy.

Here is an Example: Carl and Freda have two children who are living at home, a 20 year old daughter named Cleo and their 17 year old son Brian. Carl and Freda's auto policy carries limits up to $100,000/$300,000/$100,000 but only lists themselves as rated drivers. Cleo has her own car and insurance policy with $15,000/$30,000/$10,000 limits. Like her parents' policy, she does not list any additional drivers. Brian does not own a car or insurance policy because he only recently got his license. One night, Brian gets permission from Cleo to borrow her car. Well, things got a little out of hand and Brian ends up getting in an accident where he was found to be at fault. Since he was using Cleo's car, her policy would be first to respond. The $15,000/$30,000/$10,000 limits carried by Cleo's policy are not enough to cover some of the injuries so Brian looks to his parent's policy for coverage.

Unfortunately, Carl and Freda's policy can not extend coverage in this scenario because the vehicle is owned by a family member (Cleo).

Now, if Brian were to borrow his neighbor’s car, this restriction would not apply. But since this vehicle was owned by a family member and Brian was driving, the restriction applies. And since Brian does not have his own insurance policy, the family might be accountable for their injuries using money from their own pockets!

Unfortunately, there is no easy way to get around this restriction. One of the best methods is avoidance, such as telling the kids not to drive each other’s vehicles. If you feel as though your household situation could result in a scenario like the one above, try to encourage your kids to raise their liability limits to more acceptable levels.