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Determining which drivers must be listed on your car insurance policy

The cost of owning a vehicle can increase significantly when you allow others to drive it. You become responsible for accidents involving your car, whether you’re behind the wheel or not.

Having sufficient car insurance gives you a front-line defense if an accident happens. Your auto insurance company becomes the primary payer for damages and injuries instead of you personally -- but only if you’re properly covered for the situation.

Here’s how to make the right insurance decisions in six common scenarios.

1. Insurance for a newly licensed teenager

In general, giving consent for your teen to get a license makes you legally responsible for the young driver. It is also your responsibility to contact your car insurance company and get your teenage driver properly covered under your auto insurance policy.

Do you have to add them to your auto insurance policy?

Newly licensed teenage driver

A newly licensed teenager

Yes.

Teen driver who doesn't live with you

A teen driver who doesn’t live with you

Yes.

A minor child who lives with you but has her own vehicle

A minor child who lives with you but has her own vehicle

Yes.

An adult child who lives with you but has his own vehicle

An adult child who lives with you but has his own vehicle

No.

A parent who lives with you but has his or her own car

A parent who lives with you but has his or her own car

No.

A parent who lives with you and drives your car

A parent who lives with you and drives your car

Yes.

Friends, relatives and others who borrow your car occasionally

Friends, relatives and others who borrow your car occasionally

No.

A caregiver who drives you everywhere

A caregiver who drives you everywhere

Yes.

According to the American Academy of Pediatrics, the crash rate for 16-year-olds is almost nine times greater than the general population of drivers. So it’s wise to boost your liability limits when adding a teen driver to your auto insurance policy.

Liability coverage pays for injuries and property damage caused by drivers of your vehicle.  The higher the limits, the better, because if the limits are exceeded you have to pay the remainder. Limits of 100/300/50 are a good start, limits of 250/500/100 are even better. 

Collision insurance will cover damage to your car if your teen wrecks it. If you don't buy collision coverage, which is optional,  you’ll have to pay out-of-pocket to fix your car.

2. Insurance for a teen driver who doesn’t live with you

Divorce often leads to auto insurance complications. Just because a teen driver has moved out of your home doesn’t mean you can automatically drop him from your car insurance policy.

If your child visits on a regular basis, you’ll be required to keep the teen on your auto policy. This is true even if your teen lives with another parent who has car insurance because your auto insurance company assumes the teen will drive your car while at your house.

Car insurance follows the car, not the driver.  Because you’re liable if your teen driver visits you and wrecks your car, it’s best to carry high levels of liability coverage. If you want coverage in case your teen driver damages your car, carry collision coverage. Coverage from your teen’s other household won’t extend to your vehicle.

3. Insurance for a child who lives with you but has his own vehicle

Whether it’s a teenager who saved up for his own car or an adult child who boomeranged back home, it’s your responsibility to inform your car insurance company of that licensed driver living in your household. 

If your child owns a car but is still a minor, you could be held liable for his actions. He needs to obtain car insurance, and you may need to sign on, too, since he is not yet an adult. You don’t want your teen to carry only minimum limits; you want liability limits that are high enough so that an expensive accident won’t leave you and your child holding the bag.

If your child is over age 18 and has his own car titled in his name, most states won’t hold you responsible if he crashes his car. If your adult child has his own car insurance policy, you shouldn’t have to list him on yours.

If your teen or adult child does borrow your car on occasion, your insurance will be primary. For this reason, it’s wise to carry high liability limits. Buy collision coverage if you want your car covered by your policy if it’s in an accident.

Your child’s auto insurance policy won’t extend to your car.

4. Insurance for a parent who lives with you

A parent who lives with you and has his own car should be responsible for the insurance on it.  You shouldn’t have to list him on your policy, but you may be required to show proof of his insurance policy to your insurer.

If the parent doesn’t have a car and drives yours, you’ll need to notify your auto insurance company and add him to your policy as a driver. If you don’t, and your parent wrecks your car, the claim could be denied and the insurer might even drop you. If the claim isn’t denied, you might be charged back premiums.

Aging drivers’ skills start to decline, so if you’re sharing your car with a senior driver, buy high liability limits. Keep collision and comprehensive on your vehicle if you want it covered in the event of an accident, theft, fire, animal collision or vandalism.

5. Insurance for random people who drive your car

Occasionally you may lend your car to a neighbor, significant other, friend or relative who doesn’t live with you. You don’t have to list these people on your policy. But if you lend your car out and the driver crashes it while running an errand, the claim goes on your policy -- and your car insurance rates could go up because of it.

Before lending out your car, talk to your car insurance agent to make certain your policy covers anyone to whom you give permission to drive your vehicle (called permissive drivers).  If it doesn’t, don’t let others drive your car, or switch to a car insurance company that isn’t as restrictive about other drivers. 

Second, don’t allow anyone without a valid driver’s license to drive your car. Many insurance companies won’t pay claims if the driver’s license isn’t valid at the time of the crash. This would leave you, and the driver, responsible for monetary compensation if he causes an accident.

Don’t let a friend fool you and say his insurance will cover your car -- it won’t. Although his policy may be used as secondary coverage if your liability limits are exceeded, and his are higher than yours, you’ll still have a claim on your record.  And his collision insurance won’t pay for damages to your car, even if he is the one who crashes it.

6. Insurance for a caregiver who drives you everywhere

If you no longer drive but own a car and have a friend, relative or caregiver drive you around, it’s vital you review your car insurance policy. You have vicarious liability for anyone who operates your vehicle with permission.

Inform your car insurance company that the caregiver regularly drives your vehicle. You’ll likely be required to add this person to your policy as a listed driver.

The insurance company needs to list someone with a valid license. If you’ve lost or given up your license, you should request that the caregiver be listed as the primary driver on your policy.

As the car owner, you still need to be the one to insure your car. Here too, higher liability limits can pay off so that you’re not financially responsible for the driver’s accidents. Collision coverage is important so that you can get your vehicle repaired or replaced if your caregiver crashes. 

Any car insurance the caregiver has on his car is just that – insurance for his car, not yours.

If it's time to shop around for better rates for your situation, review the best car insurance companies to get started.

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