Insurable Interest

by: Aaron Whitaker

Having a child move out on their own can be an emotional experience. Explaining why someone’s child needs to be on their own auto policy can also be emotional at times. Though it is easier than delivering the quote – 20 somethings can be expensive to insure on their own!

When do children need their own auto insurance?

Before I start, please be sure to check with your agent as to if your child is properly covered under your policy. If they do not provide a clear answer, or even if they explain it to a T, it’s always good to review your auto policy declarations and forms. It can be like reading legal documents (because they are), but they will spell it out for you.

This is a short rundown of what some Michigan auto carriers consider eligible/ineligible for children insured on your auto policy while living out of your household. If your child is away at school with one of your vehicles (the vehicle is titled in your name, or both of your names) then they are OK to stay covered under your auto policy (so long as your insurer has rating information for the state that your child now resides in).

You should always inform your agent of a child moving out as the garaging address will need to be updated to the child’s new address. This step is crucial in preventing a gap in coverage as a vehicle garaged away from your household that is still rated by the insurance company as “at your house” is most likely rated incorrectly. Updating a garaging address for a child away at school is usually not very expensive.

If your child is out of the household and no longer in school, then they would be ineligible to stay on your auto policy. They would now need to get their own auto policy. If they are still going to be driving your vehicle (as in, it is titled to you or your spouse and not the child) then you would need to either add the child onto the title or transfer the title over to them as they would not be able to insure a vehicle that they do not have ownership in.

Titling a vehicle to a child can be a tough and very personal decision, but if you intend for them to continue using the vehicle that has been on your auto policy, then it is necessary. On a side note, if the vehicle is titled to you and your child (instead of title solely to your kid), then be sure that you are added as an additional interest on their auto policy.

Auto Insurance, Children, College, First Job, Insurance, Kids, Moving out

The Risk-

Excursions abound and breach of contract (due to violation of the eligibility rules for auto policies) rings out across the land. In all seriousness, not reporting that a child has moved out to your agent or insurer can invite trouble and liability to your doorstep. Not only could it lead back to you, but your insurance company could even deny coverage due to the change in your kids garaging address not being report (and therefore not correctly rated on the policy).

A vehicle not titled to, but insured by a child can be just as much of an issue in the event of a loss. You cannot insure something that you do not have ownership (insurable interest) in. If your child insures a vehicle that is not titled to them, claims will likely be denied as they do not have any legal ownership in the vehicle. Any litigation from said claim could find its way back to you, as it is legally your vehicle.

The same goes for any vehicle that is titled to your child but insured under your policy (unless the child that the vehicle is titled to is a named insured on the policy). If a claim occurs and it is discovered that the vehicle is not titled to a named insured on the policy, the insurance company could deny the claim, leaving you with the cost of any liability, physical damage, etc. to pay out of pocket.

Final Word-

Having a child go away to college or leave home to live on their own for the first time is often an emotional event. If they are going away to school, be sure to provide their updated address to your agent. But if they are moving out and are no longer in school, then it is time to make a decision in terms of how their vehicle will be titled.

Any time a vehicle in the family is being re-titled or a title is transferred, it is always good to follow up with your insurance agent to see what implication it may have on your policies. It is the agent’s job to identify gaps, such as the ones discussed previously in this article, and to provide the necessary service to close those gaps.

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 About the author:
Aaron WhitakerAaron Whitaker joined Whitaker-LaChance in 2014 as a Personal Insurance Customer Service Representative. He brought with him extensive customer service experience from working in a retail professional camera store and computer electronic store for three years in Chicago. Aaron manages all personal insurance placement, marketing, account service and claim management. His expertise is in working with our clients to make sure their insurance program takes care of them through all the changes in life. Aaron is a graduate of Kalamazoo Home School Association and attended Columbia College in Chicago, where he studied Graphic Art Design. He is an avid photographer and enjoys fishing.

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