Choosing Better Insurance Coverage

Few things are more important than having the right insurance coverage. About ten years ago, I was involved in a near-fatal crash where I experienced traumatic physical and emotional injuries. It was really challenging for me to endure the hospital stay and subsequent physical rehabilitation, but with the help of my medical team and my insurance company, I was able to overcome the challenge and completely recover. This blog is all about the importance of choosing the right insurance plan so that you can get on with your life and enjoy those precious years with your family and your friends.

Don't Ignore Insurance When Giving, Loaning Or Selling Your Car To Your Child

Insurance Blog

Before you buy a car for your kid or lend them one of your vehicles, you need to understand the insurance issues involved. In many households, it is the parents who own cars first and hence they are the ones with insurance. However, this should change when a car passes to a child, via any method, to avoid issues with your insurer. Consider these three scenarios, and how they can create problems for your family if you don't sort out the insurance issues:

Lending Your Car to Your Child for a Few Months

When you lend your car to your child, your insurer will be facing different risks from those it would face if you were the one driving the car. For example, your kid may be more prone to accidents than you. It might even be that the child lives and drives in a location more dangerous than yours.

Therefore, add your kid to your auto insurance policy before handing over the keys. If you don't do this, and they get involved in an accident, your insurer will be within its rights to deny your claim.

Buying Your Kid a Car, but Registering and Insuring It as Your Own

The practice of insuring your kid's car (or anyone's kid for that matter) as your own is known as fronting. Some people do it as a way of saving on car insurance because teenagers cost more to insure than adults. Unfortunately, it is fraud, which attracts different consequences. For example, your insurer may deny a claim or charge you backdated premiums if it realizes you were involved in fronting.

Avoid fronting at all costs. Instead, just let your teenager be the main driver of the car and use other measures to keep the premiums down. For example, encourage the kid to get good grades in school and help them complete a driver's education course if your insurer offers discounts for those two factors.

Selling Your Car to Your Child, But Retaining the Insurance

You want your kid to "earn" their first car, so decide to sell them your old car at a discounted price. However, you don't want to go through the hassle of dealing with the insurance issues, so you continue carrying insurance on the car.

That kind of arrangement can only work for a while before your insurer learns about it and shuts it down. You can only insure something if you have an insurable interest in it. You only have an insurable interest in a car if you would suffer direct financial consequences if something happens to it. Since you have already sold the car to your child, they are the ones who will suffer if the car gets damaged; hence, they are the ones with insurable interest on it.


14 July 2016