Non-Owners for Young Driver?

[WolfpackAgent]

Parents want to add young operator, but want them a non-owners policy because it is cheaper. Do I understand correctly that the non-owners would technically cover their liability (the young driver) in an accident, but if the young driver wrecks the car the parents are up a creek?

 

[adjusterjack]

if the young driver wrecks the car the parents are up a creek?

Yes.

But let me clarify that by explaining a few things about insuring young drivers.

When there is a young driver in the household the parents' insurance company will charge for the exposure of that young driver driving one of the parents' cars.

A Named Non-Owner Policy may be cheaper than insuring the young driver on their own policy but the parents will still pay for the young driver on their policy UNLESS they have a Named Driver Exclusion which means NO COVERAGE for them at all if the excluded driver drives their car.

I haven't found a sample Named Non-Owner Policy form but I did find a summary of one insurance company's Named Non-Owner Policy:

https://www.unitedpolicyholders.org/sites/default/files/publications/non_owner_car_insurance.pdf

It should be easy to see why a Named Non-Owner Policy is not practical in a family household situation where the young driver is expected to regularly drive the family vehicle because the liability section would exclude use of a vehicle to which the young driver has regular access.

I believe that the Broad Form Named Non-Owner Policy could be written to include liability for driving the parents' vehicle but, of course, at a much higher cost, and would still exclude damage to the parents' vehicle.

Bottom line: If you have a young driver, there is no insurance gimmick that will reduce the cost of properly insuring the young driver.

You, as an agent, should have access to a sample Named Non-Owner Policy form from a carrier that writes it. I suggest you read it thoroughly before discussing the option with your client.

And if you manage to find a sample, I'd appreciate you posting it here so I can keep it in my reference material.

 

[InsCommentary]

I've written a lot of articles about playing premium games and being pennywise and pound foolish. If you are a Big "I" member, you can access these:

Virtual University - Personal Auto Premium Games

Virtual University - Business Auto Coverage Games

Virtual University - Another Personal Auto Coverage Dilemma…Are You Up to the Task?

I would imagine the way they plan to save money is put the kid on his own named nonowner policy (probably at minimum limits) and exclude him from the family policy (which, depending on the driver exclusion endorsement, probably means the parents also have no coverage on their own policy when the kid invariably drives their autos).

The ISO Named Non-owner Coverage endorsement (PP 03 22) does not include physical damage coverage (this becomes an option in the 2018 ISO PAP). What if he wrecks someone else's auto while driving it and they either have no physical damage coverage or their insurer pays and subrogates against the negligent kid. The liability coverage in the PP 03 22 excludes damage to the auto. So the kid has to pay out of his pocket...i.e., his parents, who hoped to save some money, have to pay thousands out of pocket.

It's expensive to add kids to your policy. That fact should tell you that they are likely to have a loss. Not only do you want the full coverage under your own policy with possibly higher limits than the named nonowner coverage, you want an umbrella. When my son got his license, I bumped our umbrella from $1M to $3M.

While it's easy for me to say, I'd walk away from the account if they insist on doing this. Otherwise, I'd have an attorney draw up a really, really got holdharmless and have them sign it.

 

[WolfpackAgent]

Thanks for everyone's answers. I think we're set on this one with NO non-owners manipulation!