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My child bought a car, who should insure it?

2015-05-17 13:00:00

teen driver

Your 18 year old daughter has saved for a year to buy her first car. She found the perfect Toyota Camry and is going right now to buy it. At the dealership they help her with tax, title it in her name and license it. You call your agent to add the car on your auto policy. They give you an ID card. All done, right? 

Well, not really. 

The problem is the title and the concept of “insurable interest”. Insurable interest in layman’s terms says that you cannot insure something you don’t own. The policy requires the name on the title and insurance policy match. The dealership only listed her name but the policy has your name.

 

The consequences happen when the car is damaged significantly in an accident. You can pay the Camry premium, but the day you have a big accident the adjuster typically pulls the title of the car and the insurance policy - and they won’t match. In most cases you won’t have physical damage coverage on the Camry because of this title problem. Leaving you to pay for the damage on the car and possibly no refunds for the premium you paid all that time. 

How do I fix this?

  1. Your daughter can get her own policy but most likely it will be more expensive than if she stayed on your policy
  2. Re-title the vehicle into your name and have it on your policy
  3. Co-title the vehicle in both of your names and it can go on her own policy or be added to your policy 

I usually recommend the car is titled in the parents name until they move out of your house. Once they move out, then they need to transfer the title and get their own policy. What if they go to college, then what? Read our article on “Kids with cars at college?” 

Questions about your specific situation or want a quote? Please call our office at 701-237-6414 and ask for Denise, Becky or Jessica. You can also email me at jebeling@warnerandcompany.com. 

-Photo provided by ConsumerReports.com

-Info based on conversations with claims adjusters