My cousin is borrowing one of my cars to get to school and work. He’s 17. He lives less than an hour from me, but in another state. He is insured as a driver on his family’s policy, and the car is insured on my own policy. Obviously he’s not listed as a driver on my policy. Most insurers won’t allow me to add a driver unless they reside with me, though I think some might. He wants to buy the car from me when he’s 18, but I don’t want to transfer title before that. What are the risks and what are my options?

  • 1
    Have you talked to your insurance agent to understand your plan and any options you may have? Typically, insurance follows the car, not the driver. You may already have coverage that includes his use of the car. – dwizum Nov 26 '19 at 14:26
  • @dwizum I have, but they’re kind of vague, saying the car has to be primarily garaged at my residence, or parked at my residence at least 50% of the time, or similar verbiage. Not sure how they would prove that in the event of a mishap, but I’d like something a little less ambiguous. – bvy Nov 26 '19 at 16:01
  • You may also have to register the car in the other state. If that car will be garaged there for months, they want to have it registered there. – mhoran_psprep Nov 26 '19 at 19:24
  • You should transfer the title and name yourself as leinholder. Draw up some kind of payment paperwork with a deferred start date (until he's 18). That way you can repossess it but put all liability on them to insure it. – Ron Beyer Nov 26 '19 at 20:18

They will cover you while you're traveling, naturally; but the insurers really do not want a situation where they cover you on the basis of you living in one circumstance, when your actual circumstance is another.

In another state

Could be a problem. Insurance rules are different state to state, and as a result, rates are different from state to state. Which naturally concerns them; if you pay a low rate but the state is high-rate (because it's high risk).

The insurer may not be licensed to do business there. Even if you see a national name like Farmers or AAA, quite likely there is a separate corporation issuing the insurance in the other state.

Not at the domicile address you claim

Every aspect of insurance cares about your domicile - dangerous neighborhood affects fire and theft coverage, obviously. Differing accident rates (e.g. due to the town being in love with traffic circles) has an impact (heh) on collision and basic liability coverage. So if you tell your insurance company you're in Weehauken, NJ but actually you're 5 miles away in Newark, that's something they care about.

Likelihood of the driver getting into accidents

The driver's liability to others appears to be covered by the family's insurance. However, their risk as a driver bears heavy on the collision coverage you are paying for.

A minor

This is something the insurance company needs to know.

Non-disclosure can result in denial of claim

Effectively, you're wasting money paying for insurance when after an accident, they're going to use "You lied about the circumstances" as an excuse to weasel out of paying any claim. That makes it sound like they're doing the weaseling; they are, but from their perspective, so are you - misrepresenting facts to get a lower rate.

Denial of claim means the lender calls the note on the wrecked car, because the collateral is gone. You better be able to write a 4? 5? digit check. If injuries are involved, denial of claim means the injured party's insurance company goes after everybody including you. Either of these could be a credit-wrecker; 7 years of bad luck (10 if you declare bankruptcy).

The right answer here is to obtain proper coverage for that person in that state; or fully disclose to your insurance company as to your friend's activities, which will probably result in the same thing.

More worrisome is the parents's policy. They are carrying the risk for liability, and if their insurer backs out and they are judgment-proof, you as the vehicle owner could be left holding the bag. You should obtain some sort of insurance to protect your interests there.

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