Note to Ontario drivers. The following USA letter and reply are intended to demonstrate the often inherent complexities of automobile insurance. However, in Ontario, there are provisions for the owner and driver(s) of an automobile to be excluded from coverage entirely thereby avoiding the additional premium cost as potentially additional drivers. It is absolutely important that this provision be fully understood and adhered to should this exclusion be applied for.
Article from USA Bankrate.com and published in Fox Business
Dear Insurance Adviser,
My two daughters who are in college both took the exams for driver's licenses last summer. We live in Connecticut. They were ages 18 and 19 when they took their driving exams. We could not stop them since they were of the age of majority. They live with us when home from school but know they cannot drive since they have no car insurance.
Now, my insurance company is requiring that I pay $2,000 a year to insure them, even though they do not drive. My wife is unable to work because of breast cancer, and I am disabled due to many back injuries suffered from years of work. My insurance agent says that since my daughters are in the computer, I have no choice but to pay because they live with us when school is not in session.
I foolishly (or so it seems now) answered truthfully when my company asked if there were other licensed drivers living at my home. I figured it wouldn't matter, as the girls don't drive. My agent says they can either give up their driver's licenses or I can kick them out. Otherwise, I have to pay to insure them, even though they do not drive. Any advice on what I should do?-- Rene
Dear Rene, Your insurance agent is correct, but not because your daughters are "in the computer." The reason has to do with how encompassing your car insurance policy is, and with its "drive other cars" coverage. Even if your daughters never touch your vehicles, they're covered if they happen to drive a friend's car or borrow a car for emergency use.
Here's an example: Suppose one of your daughters is riding with someone who has had too much to drink at a party. Your daughter is sober and takes the wheel, but she has an accident on the way home and seriously injures another person. You certainly would want her to be covered for that accident, and you probably would want her to be the sober driver when necessary.
Another example: Suppose your wife suddenly needs to go to the hospital in an emergency. You are unable to drive because of your back problems. So, one of your daughters drives your wife to the hospital but has an accident on the way -- again, injuring someone else seriously. You'd want your insurance to cover that accident, would you not?
Your personal auto policy will cover both these situations and more. Thus, the charge for your daughters.
There are a couple of things you can do to affect the amount of that charge. Your daughters can voluntarily surrender their driver's licenses, at least until they can afford their own car and their own insurance. (My children did that during their college years to help with the insurance bill we were facing.)
They could even reinstate their licenses when they're home for the summer, and you would save 75% on that $2,000 bill. If your daughters make and stay on the honor roll with a GPA of 3.0 or better, you could save about 15%, or $300 a year. If either of them goes to a school more than 100 miles from home, they would qualify for a distant-student discount -- usually 50% to 60%!
The best things they can do to help keep your insurance rates down for the next couple of years (besides surrendering their driver's licenses) is to stay ticket- and accident-free, and to remain part-time drivers of your vehicles, rather than having their own cars.
One final suggestion: Some insurers offer much better pricing for young drivers than others. Have your agent check with other car insurance companies.