Can Someone Be the Insured and Excluded Driver on Car Insurance?

Understanding Car Insurance Policies

Today, I stumbled upon a policy where the only policyholder was also a named excluded driver. Moreover, the policy had no permissive use, meaning no one was covered to drive the vehicle under the policy. This policy was surprisingly very cheap, costing just $17 per month for "full coverage." It was accepted for vehicle registration and their car loan.

Some insurance companies allow such configurations, particularly in cases where the owner of a vehicle doesn't have a driver's license, and another appropriate driver, typically an authorized insured, drives the car. In such scenarios, coverage is excluded if the insured person drives the vehicle.

Insurance Contracts and Policy Requirements

Insurance is a contract between the proposer, the person or company whose name appears on the policy, and the insurance company. Typically, the proposer is assumed to be the main driver. Therefore, it’s vital to inform the insurer if the main driver is someone else. For example, if a parent buys a car for their child and insures the child as an additional named driver, but doesn’t disclose this to the insurance company, it constitutes a form of fraud.

If discovered, the insurance company would likely declare the policy void and refuse to cover claims. They might also blacklist the proposer or take them to court for fraud.

Special Cases and Examples

In certain situations, the proposer, who is the policyholder and pays the premium, may not be the primary driver. Consider a scenario where an individual’s mother retains ownership of her car but restricts driving to anyone aged 25 to 65. This setup allows her carers to drive the car without violating the policy terms.

In summary, car insurance policies can be complex, and it's crucial to understand the terms and requirements. Always ensure transparency with the insurance company to avoid any legal or financial repercussions.