Family accounts often exist with all vehicles titled in the parents’ names. However, sometimes, one of the children will acquire a vehicle in his or her own name while they still reside in their parents’ household. This scenario is not necessarily problematic, in and of itself. However, if the child vehicle-owner leaves the parents’ household without being a Named Insured on his or her own personal auto policy, coverage gaps can arise.
In a nutshell, the gaps in coverage arise when the child vehicle-owner moves out on a permanent basis and becomes involved in an accident while operating a non-owned vehicle. The child vehicle-owner, no longer meets the definition of a “family member” on the parents’ policy, as he or she has moved out of the parents’ household. Therefore, the child can no longer be considered as an “insured” for Parts A, B, and C of the ISO auto contract. Should he or she drive an uninsured or underinsured non-owned vehicle, in the event of a loss, the child vehicle-owner could find him or herself inadequately protected.
So what can you do to avoid this exposure? If a vehicle is added to an auto policy, make sure to tell your agent who the titleholder is. If it is one of the children on the policy, you should get a separate auto policy for that child for the vehicle the child owns, preferably with matching limits carried by you, the parents. Then, should the child move from the residence premises, the child will not have the above-described coverage gap because he or she will be the named insured of their own auto policy.
Note: In some situations a child may still be considered a ‘family member’ while residing elsewhere, for example, away at school.