The Name Game: Why the Name on Your Car Registration and Auto Insurance Policy Should Match
You may have heard insurance agents say they want to help you get the right coverage at the right price. To do that, your agent needs all the correct and current information about who owns and is driving a vehicle that you are insuring. Inaccurate information can lead to unpleasant coverage surprises if there's an accident.
For an auto to be the "described auto" under a Shelter auto policy it must:
- Be listed in the declarations; and
- Be owned by the owner of the policy (the named insured).
There are two very important reasons for that requirement, one related to the physical damage coverages to the vehicle (comprehensive and collision) and the other related to the liability coverage.
Physical Damage Coverages
Most states require that anyone who will financially benefit from an insurance claim payment must have an "insurable interest" in the insured property. This is because the insurance company pays the named insured for covered losses to an auto, not the person driving the auto, who may not be the named insured. After all, a person who doesn’t own the car may have no real interest in repairing it if it gets damaged.
As an example, we can't let John insure Mary’s car against physical loss by collision because if Mary wrecks it and Shelter pays John, he could simply pocket the money, leaving Mary to pay for the damage to her car. That violates the insurable interest laws because Mary isn't one of the named insureds on the policy.
Because we can't legally pay the named insured for physical damage to a car they do not own, we try to make it clear that, in order to insure a car for physical damage, one of the named insureds has to own it.
Liability coverage is different. Anyone who drives a car (whether it's their own vehicle, a vehicle they rent or a vehicle they borrow) has an "insurable interest" in protecting themselves from resulting financial obligations. We insure those persons with “owners’ policies” or, if they don’t own the car, with “operators’ policies.” We do not, however, allow them to insure a car and then provide that same liability coverage to another person on a long-term basis without our knowledge. Here's an example: An insured living in Ottumwa, Iowa was a long time policyholder and getting our best rate. He bought a car and insured it, listing himself as the named insured. That was fine because, at the time, he owned the car. He then sold the car to his son, who lived in Atlanta. His son had two speeding tickets and a DWI in the last two years. The named insured never told us he had transferred ownership of the car to his son and he left himself as the named insured. Bills for the premium went to the named insured for two years and he paid them right on time. In the third year his son was again drinking and driving and had a serious accident. He hurt several people in Atlanta. Based on what we've explained above, is the son our insured for that liability?
If we didn't require the named insured to own the car: yes, because he's essentially borrowing the car from the named insured (his father).
Because we require the named insured to own the car: no, because although the vehicle is listed in the declarations, it's not owned by the named insured-his father - and the policy definition of described auto requires that. Without this requirement, we don’t underwrite the new owner, or even know their name—and that’s a big deal!
Bottom line – let your agent know any time there is a change in ownership for any insured vehicle.