Dear Insurance Adviser,
My adult daughter recently moved to a city where she needs no car, so we transferred ownership of the car to me and I assumed payments. When renewing my auto insurance, I took her off the policy since she no longer lives with me. But now I realize she has no insurance if she borrows my car or someone else's, or if she rents one. How would she get insurance for liability in an accident if she doesn't own a vehicle?
The problem is not quite as dire as it first looks, though this is a universal problem for anyone without a personal auto insurance policy.
Those policies cover not only the operation of your own vehicle but also your liability when you operate a nonowned vehicle, such as when you borrow someone else's car or rent one. You're fortunate to become aware of this coverage gap before your daughter causes a serious car accident with injuries.
There usually is coverage on the car itself that will transfer to a permitted user. For example, if your daughter borrows your car for the weekend, your coverage will apply to her use. If she rents a car, the rental agency will have some liability coverage for her, though usually only the state minimum limits.
I recommend that your daughter buy a "named nonowner" personal auto insurance policy in her name. That way she makes sure that whatever car she drives has liability coverage with a high enough limit (such as $500,000) that she can be comfortable with.
One caution: Named nonowner policies don't provide collision and comprehensive physical damage coverage, so when she rents a car she should buy the optional collision damage waiver coverage.
There is a lesser-known alternative to a named nonowner policy. Some umbrella policies will extend "drive other car" coverage to rented or borrowed cars without requiring any underlying personal auto policy, which is a good solution for someone who wants the peace of mind of $1 million or more liability coverage. Best of all, the umbrella policy will be less expensive than a named nonowner personal auto policy.
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