Auto Insurance Question

[aggie94]

I'm trying to figure out if insurance goes with the car or the driver. I know that in the past, when I have been driving someone else's car, my insurance covered an accident. But that was not an occasion where it was a regular practice.

Here's the scenario:

BIL's car died and FIL was going to cosign on a loan for him to help him buy a new car (BIL has had credit problems in the past). Unfortunately, they could not get the loan approved with BIL's name on it, so they dropped him and purchased the car in FIL's name alone, but BIL will be the only driver (they live in different cities). Is FIL, as the registered owner, required to have carry insurance on the car, or can BIL take out his own policy on a car that he is not the legal owner of?

FIL called me, because as a lawyer, I guess I am expected to know the answer to every question under the sun that involves a law. :rolleyes: I have no idea what the answer is to this; can anyone help?

[swquilts]

Here in CA most lienholders require that the insurance coverage be in the borrowers name. Your FIL could add the BIL on as an additional driver. I don't think that insurance companies will write a policy on a vehicle that your BIL has no financial interest in.

Make sense?? (Hehe, thats the ins world I guess).

Anyway, that's how it is here. The credit union I work for will not allow a policy that is not in the borrowers name.

[Bawstinn]

I believe that your FIL won't be able to get a loan for a car without proof-of-insurance in his name. I have a car loan and recently switched insurance companies. The old one contacted the bank to tell them I canceled coverage, they called me, irate, looking for proof-of-insurance. Had to mail them the new info.

I think states differ on listing driver's on insurance. When I lived in MA, I remember having to add my mom to mine and vice versa so we'd be able to drive each others car.

Here in IA, I was never asked when I got my insurance if there would be anyone else driving my car.

[doggerham]

Eva,

I think Susan has it right -- the owner has to take out the policy to protect the lienholder's interest.

But please make sure BIL is listed as a named insured, and not just rely on permissive use. That could save a lot of headaches down the road.

[aggie94]

Thanks, guys - that's what I thought. I know that if FIL takes out a policy in his name alone on this vehicle, any family member driving it would be covered for liability purposes; they would not have to specifically be listed as drivers. But I wasn't sure if he HAD to take out the policy in his name. It sounds like he probably does.

I'm sure his insurance company could answer this much more easily than I could. :o

[aggie94]

Originally posted by doggerham
But please make sure BIL is listed as a named insured, and not just rely on permissive use. That could save a lot of headaches down the road.

Thanks, I will have him do that. It's my understanding that in Texas, your liability insurance will protect drivers other than just those named as drivers under the policy, but you're right - why take the chance? Better safe than sorry, especially since they know exactly who will be driving the car.

[doggerham]

Not necessarily "any family member". Sometimes "resident of the household" is the term used, and that is vague in my book.

As we spent 7, yes 7, years litigating this issue on an umbrella policy, through state and federal courts. That's why I suggest naming BIL as an insured.

Our scenario was thus: Drunk hits our vehicle, killing Mom, leaving fiance and 2 kiddies. Drunk has a minimum limits policy. Drunk's parents, with whom he lives, have a 1M umbrella policy. He is not named on that policy, but neither is he specifically excluded (which can be done) and argues that he's just "staying" with them, not "living" with them.

After a jury verdict of 4M on the 20K policy, we went after the 1M policy.

BTW, Drunk Driver is serving a life sentence as this was the culmination of a long history. He was living with his parents at the time as he had just been released from prison for another offense.

[tamawrite]

Yes, only the actual owner of a vehicle can insure it (because that is the personl with an "insurable interest.")

BUT, although insurance companies insure the car, they rate the driver.

Your BIL is likely to get a higher rate than your FIL. If a policy is written in only FIL's name, then BIL wrecks the car, the insurance company will NOT be happy. In fact, they could deny the claim due to "material misrepresentation," ie, your FIL represented himself as the vehicle's primary driver but in fact knew the car would be primarily used by a higher risk driver. (This concept would apply even if BIL were considered lower risk than FIL.)

The only solution? FIL and BIL will need to share a policy -- FIL as the owner and primary policy holder, but BIL as a rated driver (both will show as drivers, but BIL can be listed as the primary driver.)

HTH. Your friendly neighborhood insurance agent... ;) :)

[tamawrite]

Originally posted by aggie94


It's my understanding that in Texas, your liability insurance will protect drivers other than just those named as drivers under the policy

Quite true. If your neighbor borrows your car and proceeds to rear-end someone, your liability coverage will pay. However, this coverage will only apply to "occasional" or "incedental" use -- not a regular driver.

[mbrogier]

Originally posted by tamawrite


Quite true. If your neighbor borrows your car and proceeds to rear-end someone, your liability coverage will pay. However, this coverage will only apply to "occasional" or "incedental" use -- not a regular driver.

Wouldn't the neighbor's policy pay? I would feel responsible if I borrowed someone's car and wrecked it. If someone borrowed MY car and wrecked it (it has happened) I don't like my insurance going up for years because of it. In our case, it was my BIL and a deer strike. He paid the deductible. Since it was family, it wasn't such a big deal.

[gertdog]

Originally posted by mbrogier

If someone borrowed MY car and wrecked it (it has happened) I don't like my insurance going up for years because of it. In our case, it was my BIL and a deer strike. He paid the deductible. Since it was family, it wasn't such a big deal.

I'm pretty sure this is why you have to be very selective about who you loan your car to. If they damage your car or have an accident, it's your policy that pays because it's your policy that covers the vehicle.

[ChristieinMB]

Your FIL is taking a huge risk buying that car in his name. I'd check with insurance firms in AZ, each state may be different. Does your FIL know the driving record of your BIL. Does your FIL have an umbrella? I know it is nice to help out, BUT...
Christie

[aggie94]

Originally posted by gertdog
I'm pretty sure this is why you have to be very selective about who you loan your car to. If they damage your car or have an accident, it's your policy that pays because it's your policy that covers the vehicle.

Not necessarily. Your policy may also have coverage (I think it's pretty standard if you have comprehensive coverage) when you're driving someone else's car, including rental cars. When I borrowed a friend's car in college and had a fender bender, it was my insurance that paid the claim, not his.

Originally posted by ChristieMB
Your FIL is taking a huge risk buying that car in his name. I'd check with insurance firms in AZ, each state may be different. Does your FIL know the driving record of your BIL. Does your FIL have an umbrella? I know it is nice to help out, BUT...


FIL and BIL are not in AZ; I've suggested he check with his agent in Texas regarding some of these issues. FIL is aware of BIL's driving record, which is why he is trying to avoid taking out the policy. I agree that FIL is taking a risk, but he's a grown man, this is a family situation, and it is not my place to make that judgment. He asked me a few questions, and I was trying to find out the answers for him. Whatever he wants to do with the information I give him is up to him.

[gertdog]

Originally posted by aggie94

Not necessarily. Your policy may also have coverage (I think it's pretty standard if you have comprehensive coverage) when you're driving someone else's car, including rental cars. When I borrowed a friend's car in college and had a fender bender, it was my insurance that paid the claim, not his.


I think it must depend on the company and the wording of the policy. I know my policy covers me when I drive a rental car, but I also know that when we borrowed MIL's car for a few weeks last year we checked into how the insurance coverage worked and both our company and hers were clear that in that situation, her coverage on the car would pay if something happened to the *car*- it was less clear about property damage or medical payments.

[tamawrite]

Originally posted by mbrogier


Wouldn't the neighbor's policy pay? I would feel responsible if I borrowed someone's car and wrecked it. If someone borrowed MY car and wrecked it (it has happened) I don't like my insurance going up for years because of it. In our case, it was my BIL and a deer strike. He paid the deductible. Since it was family, it wasn't such a big deal.

Your policy would pay first; the neighbor's policy would be secondary (it would kick in if your limits weren't high enough.) And yes, your rates could go up because of it -- check off another reason not to loan out your car! :eek: (In the case of your BIL hitting a deer, that probably didn't come into play because it was a comprehensive loss, and comp claims generally don't affect premium.) Anyhow, I agree with you that if I wrecked someone's car, I would definately feel responsible and cover the deductible!