Dear Insurance Adviser,
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Our daughter is 24 and is still on our auto insurance policy -- living at home, driving our cars. Is there any way we can lower our risk if she has an accident? I should say: How can we do that as cheaply as possible?
Thank you very much.
Dear Pamela, Whenever the driver of a vehicle causes an accident, the injured party usually sues both the driver and the owner. They sue the driver for negligent driving. They sue the owner for the negligent condition of the vehicle that contributed to the accident. It's not that difficult to prove that the tires were a little too worn or the brakes were not in the best condition or the steering was out of alignment.
There are some things you can do to reduce your risk. You can gift or sell one of your vehicles to your daughter, which transfers the ownership risk from you to her. If that's not feasible, require that she get her own vehicle and insurance.
The lowest-cost way to insure that vehicle usually is with the same insurance company that insures your cars. She could save about 40% on the cost of insurance if she gets a nice, older vehicle that doesn't need collision or comprehensive coverage for physical damage. An advantage if she has her own auto insurance policy is that any tickets or accidents that she gets will affect only her rate -- not yours.
One caution: While she is living at home with you, make sure that her auto liability limits equal yours. If you have an umbrella policy, make sure that her liability limit satisfies the minimum threshold required by the umbrella policy. A common mistake is allowing an adult child to buy less liability coverage than the parents buy because the adult child has a much lower income and asset position, and with less to protect doesn't need as much coverage.
This is a mistake because it could put you in violation of your personal umbrella requirements, leaving you responsible for the difference. It's also a mistake because there may be occasion where you need to take your daughter's vehicle. Your automobile policy covers you when you drive other people's cars, with one exception: It doesn't cover when you drive other vehicles in your household that are owned by family members.
If you must require your daughter to have more liability coverage than she would otherwise buy, it might be a nice gesture to pay the difference for the increased limits.
When she moves out and establishes a permanent residence of her own, she is free to buy auto insurance at whatever liability limits she wants, with no effect on you.
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