One of the most frequent questions "I am buying my teenage son/daughter a car. Should I add them to my policy or have them get their own coverage?" Often an attorney or financial adviser will recommend that the child be covered on their own Auto policy not the parents. On the surface, this might seem like good advice. After all, usually the young person usually has little to no assets to protect so why bother? Also, young drivers tend to get into more accidents than us old folk. Why mess up mom and dad's insurance?
Well, there are a number of reasons why putting Junior on their own policy is a very bad idea. Here are a just a few:
- Let's look at the premise of the child has little of no assets: While that may be true today, they likely will have high paying jobs and significant assets in the coming years and those future resources can be accessed in a lawsuit.
- In states where the family is located in a state without the parental liability statue, one might think the parents have no liability. Also, what if the teenager is over the age of 18? That should also eliminate or at least reduce the parents liability, right? Well, not really. There is a legal term called "Negligent Entrustment" A quick example would be in order here:
There was a case about a 33 year old defendant that was under the influence of alcohol and drugs when she got behind the wheel and caused an accident that resulted in the death of a 17 year old boy. The defendant had her own car and own insurance. The jury found the parents responsible for negligently entrusting the car to her who had a long history of drug and alcohol abuse. The decision totaled 1.2 million. The reality is there are a myriad of ways to allege liability beyond just being a parent.
- What if a parent borrows a Childs' car and has an accident in a vehicle with lower limits? I can assure you that in a situation like that, the parents policy will not make up the difference!
So what to do? How do we solve this? You are not going to like the answer, but my recommendation is that as when possible all family members should be insured under a single Personal Auto policy. Also, have an Umbrella Liability policy to give you even more protection. While this may cost a few dollars more upfront, it can save you potentially many thousands of dollars in jury awards and legal fees in the future.
Questiions? Comments? I'd love to hear what you think. Leave a note or reach out to us at: Info@brookswaterburn.com .