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This is about laws in U.S.A. where a driver's license is often the most common form of identification.

Some of the backstory:

My wife's sister and her son live with us. Due to her being a single-parent mom and needing a way to get to work, I purchased a car years ago that I have let her use. I never transferred the vehicle title to her because it seemed she did not make enough to pay for the insurance. Consequently I have also been paying for the insurance on both my own car and the car that has been predominantly in her use.

Now when her son obtained a driving license, there has been some talk about him getting his own car and his own car insurance. However my wife called our vehicle insurer (GEICO) to inquire about adding him to our car insurance in the mean time.

As was kind of expected we found out that the insurance rate would go up. More interestingly however the customer service agent also told us the following:

  1. That everyone in the household with a driver's license must be listed on the insurance.
  2. That the only way to avoid having my wife's nephew on our insurance is by him surrendering his driver's license.

To me these statements make no sense because there can be multiple valid reasons why a person would have a driver's license (a common form of ID in USA) but not have a car insurance. For example:

  • They do not have their own vehicle.
  • They live near shopping areas and prefer to walk or bicycle.
  • They had a car in the past but now do not have one.

Even in a situation like ours the person living in a household should not necessarily be the responsibility of another member of the household. They could be a roommate/cotenant who would be normally responsible for their own expenses or life choices as regards vehicle ownership/use.

So thinking about this it seemed like the insurance company is coercing me to pay for another person's insurance just because that other person lives in my household.

So here is the question I have:

Can a car insurance provider demand that I insure a particular person having a valid driver's license in my household?

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    The insurance cannot demand that you insure those persons, but they can decline to insure you if you don't, and write in the contract that you invalidate your insurance if you hide an extra person. Simply go to another insurance; Geico is expensive anyway.
    – Aganju
    Jun 9, 2022 at 4:20
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    Those statements make perfect sense because you can drive someone else's car. That is, in fact, what 90% of all 16 and 17 year olds do: drive someone else's car.
    – RonJohn
    Jun 9, 2022 at 4:36
  • @Aganju Progressive goes further: not only must everyone in the household with a DL be listed on the policy, but EVERY ADULT must be listed or explicitly excluded.
    – RonJohn
    Jun 9, 2022 at 4:39
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    California at least offers an ID card similar to a driver's license but without the driving privilege. Jun 9, 2022 at 5:05
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    @MikeScott some insurance companies "play defense" and assume that any adult in the household can pick up the keys to a household car and drive it, even if you aren't explicitly listed. "I needed to get some more beer, so I borrowed Bob's car. Didn't think he'd mind."
    – RonJohn
    Jun 9, 2022 at 14:48

1 Answer 1

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This rule is a reaction to a form of insurance scam that is unfortunately extremely common.

The scam works that when you have a household where there is a young driver who is expensive to insure, you don't actually put them on the insurance. Instead you pretend to the insurance company that they won't really be driving the insured cars. In reality they drive them all the time. If they get in an accident you tell the insurance company that they just borrowed the car, and this was a one off very rare event. Because North American insurance policies cover "any driver driving with permission" the company has to pay up.

The rule you are seeing is to prevent this happening. If you genuinely have someone in your household who really (really) will not be driving the cars then a) you are very unusual b) your situation has been spoiled by the many thousands who do the above scam. There isn't much you can do, except try another company. And yes, it is legal.

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    "Because North American insurance policies cover "any driver driving with permission" the company has to pay up" Just out of interest, is this law or just convention? Ie. could they offer you insurance that does not cover this (in the UK it does not)?
    – User65535
    Jun 12, 2022 at 8:13
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    As far as I know it's just the normal thing, but I could be wrong. Jun 12, 2022 at 17:04
  • The problem comes with roommates. Much more reasonable is a rule where any household member not named is specifically excluded from coverage. Jun 13, 2022 at 1:34
  • What would happen if an insurer were to require that an ensured sign a contract specifying that unless or until they notify the insurance company to the contrary, they will refuse a particular person permission to use any of their vehicles? Also, how "unusual" would it be for a household to contain a young person who owns a cheap car, and other people who own a fancier car that they would never want the young person to be driving?
    – supercat
    Sep 28, 2023 at 16:44
  • Insurance companies are very reluctant to make custom contracts, because then a whole load of expensive lawyers have to review them. You may find they are prepared to make an exception for a person in the household who has their own car which is insured separately (especially if it's insured with them). Sep 28, 2023 at 21:27

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