When you are shopping for Auto insurance, it is likely that you will be asked who else lives in your household, in addition to you and anyone else you plan to allow to drive your vehicle. Often people wonder why this would make a difference and many ask why this should affect their rate.
Insurance carriers set rates based on actual claim statistics. Teenage drivers pay more than adults because claim statistics say they are more likely to get in an accident in the future. People with prior tickets or accidents on their record pay more for the same reason.
These same claim statistics are the reason that insurance companies want to know about everyone of driving age who lives in your household. Insurance companies are concerned by the frequency of cases where an undisclosed driver was behind the wheel when an accident occurred.
Another issue is that Minnesota Auto policies are required to cover all relatives that live in your household. So if you live with a brother who never drives your vehicle but brother borrows a friend’s vehicle and gets in an accident, your insurance could be legally required to pay for that accident if his friend’s vehicle wasn’t sufficiently insured.
In order to price its policies and determine who to accept as a customer, an insurance company needs to be able to develop of a full picture of what level of risk a given potential new policyholder poses. Perhaps someone else living in the household is little or no additional risk at all, but the insurance company can’t make that analysis until they know that this person exists.
For these reasons, most insurance carriers will ask you to disclose everyone age 15 and older who lives with you. These individuals may then be categorized into different groups: a) other regular drivers of your vehicle; b) licensed residents who don’t have their own insurance; c) household members who do have other insurance; and d) residents who aren’t licensed. Often people falling under a) and b) will have to be rated as drivers on your policy, while c) and d) may not.
One frustrating scenario is the case where there is someone living with you who has a suspended or revoked license. Most preferred carriers feel that this household member poses an unacceptably high level of risk to your insurance; therefore, many companies don’t want to write a policy if this is the case.
We consider it our mission to explain insurance in a way that our clients can understand it. We hope this post helps. As an independent agency, we represent a number of different companies with different rules and procedures. If you let us know your situation, we will work with you to find the best available solution for your insurance needs.
Ken Cobb is owner of Pine Country Insurance and has been active in the insurance industry for over 15 years. Meet Ken.
Coverage descriptions found in this blog are summaries provided for general educational purposes and cannot fully detail the terms, conditions, limitations or exclusions of a specific insurance policy. Please read your policy carefully.