Q: We have three children over the age of eighteen living at home. They have cars which are about to be put into their own names. None of these kids have any assets to speak of. Our question is if they get car insurance under their own names (the minimum amount allowed by law) and they get into an accident, do we have any liability/responsibility for any damages which may have occurred? Is it necessary, or wise, to include them under our umbrella policy? -- SC, via email
A: If the cars are in your children's names, you won't be liable for any accidents they may have. The liability will be theirs. Adding the kids to your umbrella policy isn't an option; that policy only covers damages for which you are legally responsible.
There are two schools of thought about how to insure young adult drivers, and it sounds as if you've confused them.
The first view is that when your kids start to drive, you should let them use a car that you own, and add them to your own auto policy. Of course, your premiums will rise sharply. Nevertheless, this option is usually cheaper than putting a car in a young adult's name and buying him his own policy: His insurance rate is lower when he is covered as an occasional driver of your car than as the primary driver of his own car.
If you're as concerned about your child's driving as you are about the cost of his coverage, this choice has an additional benefit: He'll probably drive your car more carefully than his own; and you'll have more control over when and how he drives it.
But there is a drawback: When you own the car he drives, you're financially liable for any accidents he causes while driving it. That's why it's especially important for parents who let children drive their cars to own a personal liability umbrella policy. The umbrella policy increases the liability insurance you already have in your automobile and homeowner's policies -- and it's cheap. You can buy a $1 million umbrella policy for about $350 a year.
The alternative course is the one you've described, which is to put a car in your child's name and insure it separately. This is usually more expensive than adding him to your policy; but it protects your financial assets from any liability suit that may result from the way he drives. (Of course, it's still a good idea to own an umbrella policy.)
Whichever option you choose, take time to comparison shop for car insurance. You'll be well paid for the effort. The cost of coverage varies dramatically from one company to another. It's easy to get price quotes online. Progressive Insurance Corp. (www.progressive.com) gives quotes on its own policies and those of up to three other insurers at no charge. Also check out Geico (www.geico.com). You can compare their rates with those of other auto insurers, which are available at www.insweb.com and at www.insurance.com. Ask each insurer about discounts. Many companies discount premiums for drivers who've taken defensive driving courses, for example.
