One of the areas of Michigan auto insurance where I most frequently encounter misinformation and mistakes is insuring young drivers.
As a starting point, let’s address when a new teenage driver should be added to your auto insurance policy:
Whenever a teenager is preparing to begin driving you should always inform your insurance agent and confirm when the driver needs to be officially added to your policy.
Underwriting rules vary between insurance companies: Some insurers require new drivers be added to your policy as soon as they obtain a permit and begin driving while other insurers will automatically extend coverage while a teen is training and will only require they be added to your policy once they have obtained their Level 2 Michigan Graduated License.
When you add a newly licensed driver the insurance company will need to know:
- The driver’s full name, date of birth, and drivers’ license number
- What vehicle they will be driving
- Whether they qualify for a good student discount
When to add a newly licensed driver is relatively easy; what proves more confusing is when to remove a young driver from an auto policy. The two most common mistakes being:
- Prematurely removing a driver from a car insurance policy
- Keeping a driver on an auto policy who is no longer eligible for coverage
The first mistake results from misidentifying when a young driver is no longer a household member. As long as the family’s address is a young driver’s legal residence they need to be listed on the family auto insurance policy.
There may be scenarios when the rate for a young driver may be discounted (away at school without a vehicle), when they may not be rated (have their own vehicle and insurance), or when they may be excluded from the family policy (typically reserved for poor driving record situations), however as long as a young driver remains a member of the household they need to be accounted for as they remain a potential risk for a claim.
For this reason you’ll often find when you request a young driver be removed from your auto policy the insurance company may request information about the driver’s new address and/or insurance. The insurance company isn’t being nosy; they are simply protecting themselves as it isn’t uncommon for people, whether mistakenly or intentionally, to try to remove a young driver from an auto policy who still needs to be insured.
The second mistake is the most problematic: Keeping a young driver, who is no longer eligible, on an auto policy.
The reality is when a young driver moves out of their parent’s home they are usually faced with higher insurance costs – they are likely to lose multi-car, multi-policy, and good credit score discounts they benefited from while on their parents policy.
Faced with this situation many people mistakenly act as though their auto insurance policy is similar to a shared family cell phone plan or Amazon Prime membership and leave the young driver on their policy and neglect to inform their insurance agent the young driver has moved out of the family home.
This is a potentially dangerous insurance mistake.
Every Michigan auto insurance policy includes definitions, terms, and conditions (that most people don’t bother to read). Within this fine print the insurance company clearly defines who they are insuring and, almost universally, that definition includes verbiage specifying covered family members must reside in the same household.
If a significant loss occurs, such as a totaled vehicle or serious injury accident, you can be assured the insurance company will carefully review all details pertaining to any claim. If the driver involved was no longer a member of the household – whether they have a different address on their driver’s license, rent or own a separate residence, changed titling for a car, and/or have gotten married – the insurance company is likely to deny coverage. In the event of a significant loss a denied claim could amount to tens or hundreds of thousands of dollars.
The important takeaway being whenever you’re faced with a changing situation involving drivers in your household you should always call your insurance agent, inform them, and make certain your insurance is properly updated.