Not Adding Your Teenager to Your Auto Insurance

It was an interesting week at the office especially as it pertains to “undisclosed teenage operators” aka not adding your kid to your auto insurance. The thing that everyone always says when they call to add their child to the auto insurance is, “Let’s do whatever we need to do to get the lowest cost.” Yes, kids do cost a lot of money for their parents. But, they also cost a lot of money to the insurance companies! There is a reason for the correlation, I promise.

Lately it seems there is this rumor going around that you don’t need to add your child to your auto insurance in order for the accident to be covered. I received an email on Tuesday from a longtime client that asked if we needed to add his newly licensed 16 year old daughter because his buddy did not add his son and said that “permissive use” was acceptable. Wrong information.

Later that same day, I received a call from a completely different client whose 16 year old son had flipped the vehicle and was not a listed driver on the policy. The insurance company instructed him to give me a call to get the young man added. In the process, he added two other teenage step kids that all lived in his household. His rate increased quite a bit as you can imagine.

So what happens if you don’t add your teenage driver? If your insurer doesn’t find out about your teen until there is an accident, it still might cover the incident. That would be a lucky outcome, but you’d likely owe back premiums based on when your teen driver was licensed — so may have to pay the insurer a lot at once just to have the accident covered and teen insured. Or, your auto insurance company may say it’s not covering the teenager and is dropping your policy because of your failure to inform it. They call this misrepresentation and can be considered insurance fraud.

“Premium Leakage” due to undisclosed operators is a major issue for insurance carriers today. Companies are doing what they can to combat this. For example, a car insurance company can pull reports that identify “hidden” household members. One such report from LexisNexis looks for “undisclosed” newly licensed drivers between ages 15 and 25. If your insurer finds out about your licensed teenager this way, it can revise your premiums to include the young driver, or decide it doesn’t want your business anymore.

So long story short, if you have a teenage driver or will have one soon, please do the rest of us a favor and follow the rules. Because when you don’t it makes all of our rates go up!

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