We want you to be protected; that is the sole purpose of insurance. Make sure that you make the right decisions to protect your relationship with auto insurance companies. If you are in doubt, please call our team at Dominion Risk Advisors and we will help you make a good decision.
Here are mistakes that you must avoid:
1. Failing to add a teen driver
Whether through oversight or intentional, failing to add a new driver when he/she gets a drivers’ license will damage your relationship with your insurance company. They will have the right to back-charge you for premiums that they should have collected; they may have grounds to deny coverage, and they are likely to non-renew your coverage at the policy expiration.
2. Allowing an adult child to take your car out of state
Many parents continue to provide health insurance and cell phones for their adult children. Why not keep the car on the parents’ auto policy? Auto insurance companies rate their premiums based upon the garaging location of the car. In addition, your policy says that you will disclose changes to exposures that are relevant to them. It is possible that the insurance company could deny coverage if there were an accident. In addition, since the adult child is no longer a member of your household, he/she will not have any liability insurance when they are operating another vehicle. When your adult child moves out of state, make sure that they are on the title, have them register the car in the new state, and have them purchase an insurance policy in his / her name.
3. You want to finance and insure a car for a relative
Lenders expect that the name on the loan, title, and insurance match. Insurers expect to understand your “insurable interest” in a vehicle. When you try to help a loved one by buying them a car, borrowing money on their behalf or purchasing insurance for them, you can create a series of difficult problems. For example, you must disclose to your insurance company any “side” deals that you have to extend your insurance coverage to a family member. Failure to secure approval from the carrier will likely lead to a denial of coverage.
4. You are using your vehicle for a ride-sharing or delivery job
There is a real increase in the gig-economy (at least until March 2020). Typically, a family auto policy excludes any business activities. You must address this with your insurance company. They may have an endorsement that allows you to deliver pizzas or work for Uber or Lyft or they can sell you a commercial auto policy.
5. You loan your car to a friend for an extended period of time
Most auto insurance policies have coverage for a “permissive” user. This is someone who is not a member of the household whom you allow to borrow your car. You are assuming the vicarious liability for your friend’s operation of the vehicle. In addition, if the car is garaged at your friend’s house, you have not disclosed the proper garaging location to the insurance company. Your carrier would likely deny coverage if there were an accident. Sell your friend the car and let him buy the insurance.
6. You sell someone a car on installments
If you sell someone a car and allow them to pay you over time and you keep the title and insurance in force, you can have a real problem. You remain the owner and you are assuming significant liability. You have no control over the behavior and practices of the person who you are allowing to drive your car. You are buying the insurance but neither your interest nor that of the buyer has been properly disclosed. It is likely that you would not have coverage if there were an accident.
7. You fail to add a new vehicle to your policy
Do not depend upon “automatic” coverage. While some policies allow you to have the same coverage automatically when you replace an existing car, there are countless things that can go wrong including failing to get the schedule of vehicles correct at renewal. You should always call your agent and inform them of the exact changes that you are making.
8. You do not tell your insurance company about a regular driver of your vehicle
We have discussed similar situations above. Let’s assume that someone is living in your house – an unemployed friend, an adult child, or a companion. The insurance company expects to be informed about regular operators. They are entitled to check their driving records and charge the appropriate premium for the people driving the cars that they are insuring.
Be careful and email or call (540.366.7475) us at Dominion Risk Advisors to make sure that you are managing your auto insurance or any risk management matter properly.