Often families with teenage drivers living at home do not have those teenage drivers listed as named insureds on the auto insurance policy. Frequently, Mom and Dad are the named insureds on the insurance policy and all the vehicles are listed, and the teenagers qualify for coverage by virtue of being related to Mom and Dad and living in their home. This type of familial relationship coverage for the teenage drivers usually has a special term of art in the insurance policy, such as “resident relative,” “member of same household” or “resident of your household.”
While each insurance company defines their terms differently, generally speaking, this type of familial coverage means that drivers who are living with their parents qualify for insurance coverage even though they are not the “named insureds” on the auto insurance policy. This type of coverage is usually defined as a person related by blood (or adoption) to the named insured and living with the named insured; some insurers may limit this category to minor children only, but others may include adult children as well.
The reason this topic is being raised, is that sole reliance on resident relative coverage can create potential problems when that child moves away from home (goes to college or armed forces) or splits time between two homes (divorced parents). Hopefully, a hypothetical will illustrate.
Billy is a hypothetical 18-year-old high school senior living with Mom and Dad. The family has a hypothetical auto insurance policy that lists Mom and Dad as the named insureds and covers both of the family vehicles. While Billy is not a named insured on the policy, by virtue of being related by blood to Mom and Dad and living in the same household with them, he qualifies as a resident relative insured, even as an 18-year-old.
Billy graduates from high school and goes off to college in another city; he is no longer living with Mom and Dad, nor is he listed as a named insured under any other auto insurance policy. While at college, Billy gets injured in a terrible auto wreck while riding in a friend’s car. Unfortunately, the at‑fault driver does not have sufficient insurance (or worse, no insurance at all) to cover Billy’s extensive injuries and damages. However, Billy and his parents think that Billy should have underinsured motorist coverage available to him under Mom and Dad’s auto policy.
The problem is, Billy may no longer qualify as an insured under Mom and Dad’s auto policy. Billy was never a named insured, the crash did not involve Mom and Dad’s cars, and Billy may no longer qualify as a resident relative. Because Billy was not living with Mom and Dad at the time of the car crash, he may not qualify as a resident relative anymore. Whether Billy qualifies for coverage under Mom and Dad’s policy will depend on the policy’s definition of resident relative and Billy’s precise living situation at the time of the wreck. Had Billy completely moved out or did he leave his furniture and personal belongings at home? Where was he getting his mail, or what was his voting address? Regardless of the facts, by virtue of no longer living under the same roof with Mom and Dad at the time of the wreck, the insurance company will likely argue that Billy does not qualify as an insured.
You and your family, can avoid being left in this limbo by making sure your children who are leaving and not getting their own auto insurance are specifically listed as named insureds on your auto policies. That way, if they are injured in a car wreck, they can have the benefits and protection of the uninsured and underinsured (if underinsured was purchased, and it should be purchased) coverage.