Over the past three weeks, I’ve been faced with three interesting scenarios involving young adults and how to handle their car insurance. There was the adult who hadn’t left the nest, the boomerang, and the one who’s married and out of their parents’ home but received the gift of a car from the parents. Each presented its own uniqueness in addressing who purchases the car insurance, however there was one commonality that everything hinged on. Let’s look at each one.
Still in the Nest: This situation involved an adult son living with their mom. The son is financially independent and working full time, however, was still on his mom’s car insurance policy. Mom was ready for him to take the next step in his independence by having his own insurance.
Boomerang: In this case, a parent called when their daughter was moving back in after losing a job. The parent wondered whether to place their daughter on their car insurance policy or have her maintain her own.
Parental Gift: Finally, I had the pleasure of working with a couple buying a home. I suggested we also evaluate their car insurance to see if it made sense to combine the two. I could quote the husband’s car insurance; however, the wife had been given a car and the parents were paying the insurance for her.
There is one common question I asked to determine what approach to take when addressing each scenario, “Who owns the car?” One of the guiding principles of Texas insurance law is ownership defines insurable interest. The person who owns the property may buy the insurance on it, otherwise, I may purchase insurance on my neighbor’s car and seek to profit from it when it “disappears!’
With that principle in mind, here’s how each of these 3 scenarios worked out.
- The son who is still in the nest is the titled owner of the car, so he should have car insurance in his name and now has his own policy!
- The same was true for the daughter returning home. She owned her car, it was titled in her name, and her parents do not have an insurable interest in it. Certainly, they can help her financially get back on her feet, but the policy needs to remain in the daughter’s name.
- The married daughter does not have an insurable interest in her car as it’s titled in her parent’s name. Her parents are well within their rights to have the car insurance in their name. Some companies, however, will force the issue of the daughter getting her own policy due to there being two households.
What situation do you find yourself in? If it’s one of these three, then this should guide you in determining who gets the honor of buying the car insurance policy. If you have a question, comment, or experience you’d like to share with me, please do so on my Facebook, Google +, or LinkedIn page. I’d love to hear from you!