Monday, June 27, 2011

Have grown kids? Stop throwing your money away!

I talk to a lot of young adults who tell me that they don’t need auto insurance because they are covered on their parent’s insurance plan. I ask them if they still live at home, and they say ‘no, but I’m paying my parents for my part of the insurance,’ or ‘no, my parents list me as a driver on their policy and cover it.’ It’s important for everyone out there to understand how insurance works, because in a situation like this, you’re probably paying for nothing.

When you actually read through your insurance contract, you’ll find that the only people who are actually covered on the policy are the two named insured’s, and their “resident relatives that are living in the household.” Also covered are people who borrow the named insured’s vehicles, but not if the vehicles are “readily available for their use.”

Basically, this means that your kids who don’t live with you aren’t covered because they are not ‘resident relatives that are living in your household,’ and your vehicles are ‘readily available for their use’ because they are driving them every day.

Most people think that if they list their kids on their policies as drivers that they will be covered, but this is not the case. Listing drivers has nothing to do with coverages on the policy; it is strictly an underwriting measure by the company. They want you to list all members of your household on the application so they can charge you more money. In fact, you have to list all members of your household or show proof that they have coverage elsewhere, or you’ll risk cancellation or a premium increase. However, this again is an underwriting measure by the company to ensure that you are being properly rated by the company for all household drivers. Listing someone as a driver on your policy does not guarantee coverage for that driver.

So, you must list all your kids that are living with you as drivers on the policy, but if a child moves out, they are no longer covered under the insurance contract even if they are still listed as a driver and you’re paying extra premium for them. You are basically throwing your money away in this situation.

Now, when your kid causes an accident or incurs damage to a vehicle and they have to file a claim, how will the insurance company know that your child has moved out of your house? The answer is that it depends on the size of the claim. If it’s a small claim, the company will likely pay for the damages without too many questions. However, if it’s a large liability claim (for example, your child causes a car accident that injures someone, who then sues you and your child for thousands of dollars), the company is going to send a claims adjuster out, who is going to ask a lot of questions and will most likely discover that your kid moved to a new place.

Your insurance agent can’t possibly explain everything on your policy to you. You’re not interested in sitting there for hours discussing it, and there is so much to go through that your agent doesn’t know exactly what is most important to your situation. So it’s important that you make sure to ask your agent a lot of questions about anything that concerns you. Don’t be afraid to call and ask. If you have a good agent, he or she will be more then happy to talk to you, and will probably be grateful that you called. It would also be a good idea for you to read over your insurance contracts and mark any areas that you don’t understand or have questions about. Talk to your agent and go over them together.

The last thing you want is to have disaster strike and be denied a claim by your insurance company, especially when you could have been covered if you’d only thought to ask your agent about it beforehand.

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