Is it risky being listed as primary policyholder/driver on auto policy when I don’t own the car but own all the assets?
UPDATED: Oct 14, 2020
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My live-in partner wants to list me as primary policyholder & primary driver on a shared auto insurance policy, in order to save money on premiums (my credit rating/insurance history are very good, so my rates would be considerably lower than hers). I no longer own a car, and am not on the title of either of her two cars, both of which she uses for work and to drive us around. Her current policy, upon which I’m named as a secondary driver, is in her name and lists her as primary policyholder & primary driver. She says listing me as primary would also allow us to afford add’l umbrella coverage @$1M, to protect my assets (she has none) against lawsuits in the event of an accident. I’m afraid instead it might expose me to more risk of being sued if she got into an accident with one of her cars and hurt someone, for the very fact that I DO have the vulnerable assets, while she has none. I’m also concerned whether my driving record or insurance rates could be negatively affected if she got into an accident.”
Asked October 14, 2015
In the state of Colorado, vehicle owners are required to insure their vehicles in their own name. While it might appear as if it is best for you, as the owner of all of the assets in the household, to purchase car insurance, designating yourself as the named insured and the primary driver on the policy can present problems with the Division of Motor Vehicles. The main problem with listing a household member other than the owner of the vehicle is that the policy owner and registered owner must match when insurance on a vehicle is being verified. If these two names do not match, the owner's registration could be suspended and then you will have to pay fines and reinstatement fees just to sort it all out.
How Can You Structure the Policy to Protect Your Assets?
Now that you know that putting the insurance in your own name is not the ideal solution to protecting your assets, you might be wondering how you can ensure that you are protected. You do have the option to put the insurance in both your name and your girlfriend's name by separating the named with an 'and' or an 'or'. While it might sound like a minor tweak, but whether you choose to write 'and' or 'or' is very important in terms of filing a claim.
With the 'and' phrase on the named insured, both you and your girlfriend would need to sign off on the claims check before it can be cashed. With the 'or' phrase, either one of you can cash the check when a claim is filed. Just remember that if the car is financed, the lender is a loss payee and must sign off before any other party receives payment.
Since both your girlfriend's name and your name are listed on the policy as owners, your assets will be protected and the DMV will be satisfied. If credit is an issue for your girlfriend, you may have to pay higher premiums to satisfy the rules of the state by being a named insured. Having yourself as a secondary listed policy owner, however, can help you ensure that you can buy an umbrella in your name for $1 million of blanket liability cover since the underlying auto insurance will satisfy the Personal Umbrella Policy requirements.
Can You Be Sued If She is Involved in an Accident?
Whether or not you can be sued or are at-risk of lawsuit in today's litigious society depends entirely upon whether or not you drive her vehicle. If you are currently listed as a secondary driver, it is safe to assume that you drive the car from time to time. As a listed driver, whatever personal liability is covered under your girlfriend's policy will extend to protect you. It is possible that injured parties could attempt to sue you if you were operating the vehicle at the time of the loss.
If you do not operate the vehicle, however, you are not at-risk of being sued for any damages that your partner is responsible for unless you are married or registered domestic partners. As long as the assets are only in your name they are not vulnerable when another household member hurts someone or causes damages in the car. If you are a named insured on the policy, your rates can go up when a claim is filed from a listed driver. Your driving record, however, will not be impacted unless you were the party behind the wheel.
Answered October 28, 2015 by britt5689