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Car Insurance and Moving Back Home With Your Parents

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Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency...

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Reviewed byJoel Ohman
Founder, CFP®

UPDATED: Mar 13, 2020

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The following question came from a reader:

“I just moved back in my mother’s house and I recently got my own car insurance with Geico. Just prior to having Geico, I started a policy under my mothers insurance.

My mother says that her insurance company won’t deduct the prices to what she used to pay before I was on her policy because I live in the house. I think that’s wrong because I have my own insurance. Can Progressive do that?”

It sounds like there may be some confusion between the insurer and the guy who wrote in.

While Progressive can have whatever guidelines they want, i.e., once a household member is disclosed, that individual must be listed on their insurance policy, it is highly unlikely they will not, at the bare minimum, offer to exclude the son from coverage.

Even though there may be an “exclusion charge” for doing so, it would cost significantly less than having him listed and rated as a driver.

In most states, if a household member (of driving age – as young as 14) is disclosed or discovered via reporting, the named insured must address the driver as one of the following options:

– not rated: has other car insurance
– not rated: excluded from coverage
– not rated: not a licensed driver
– rated: insurer will charge you for this additional driver

Rules Protect Against Possible Fraud

As with most insurance “rules” that seem somewhat silly, the reasoning behind the decision to do it this way is to protect the insurer from fraud.

For example, you may not want to list your teenage drivers (who are household members) because you know they will greatly increase your insurance premium.

An unscrupulous individual may say, “they have their own coverage – so I don’t want them on my policy.”

But the reality is there is no way for the insurer to guarantee that this is a true statement. Unfortunately (or fortunately depending on how you look at it), unlisted household members OFTEN drive vehicles and cause accidents.

And insurers are often “on the hook” for defending against the resulting insurance claims in court and paying out damages if any are awarded to the injured party.

In this example, the insurer is the only “loser.” The parent didn’t have to pay extra premium for their teenage driver and the injured party is compensated. The insurer wasn’t able to collect the appropriate amount of premium for the “actual” risk they were incurring as part of the policy.

Multiply this example by thousands, if not millions, of unlisted drivers and paid claims and you can understand why an insurer simply says, “If they reside in the house, they have to be listed and pay for coverage.”

However, at the bare minimum, a named insured should be able to exclude a driver from coverage by requesting to do so and signing a document that states they understand there is no coverage for that particular individual.

The exclusion can be thought of as “putting your money where your mouth is.” If the listed, but excluded driver causes an accident, the insurer simply does not have to defend them in court or pay for damages – although the owner of the vehicle would still be liable for the damages in court.

Read more: How much is car insurance for a 16 year old?

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