Insurance Alternatives

The insurance market has changed over the last few years. Insuring a young driver as a named driver on a parent's policy was often the way many started out on the road.

Times have changed and whilst there is the temptation to save money in the short term, this does present hidden dangers.

Insurance Traps

Insuring a car that is owned by the parent.

Occasional use of the car

Is fine to allow your son or daughter to have occasional use of your car as a named driver.

Regular use of the car if your son or daughter has consistent use of your car the situation should be considered very carefully as you could be accused of insurance fronting. In this case your son or daughter could be deemed to be the main driver not a named driver which could be very difficult to prove otherwise.

Insuring a car that is NOT owned by the parent.

Unless you own the car you have no insurable interest and the insurance company would be within their rights to refuse to pay out on any claims.

Insurance fronting

Insurance fronting is where parents use their age and/or their no-claims bonus to insure a car for their son or daughter to regularly drive in an attempt to reduce the cost of insurance.

You are under an obligation to inform the insurance company of the identity of the main driver when you insure a car, it is wrong to assume that because you own the car it is acceptable not the tell the insurance company of the real details as to who will be mainly driving the car. To put the young person on the policy as a named driver is not sufficient.

Insurance companies are getting tough and stamping down!

If the car is solely or even predominantly used by the young driver the policy must be insured in the main driver's name. If the insurer finds out they are very likely to cancel the policy or worse still, in the event of an accident, refuse to pay out or demand a substantial contribution from you.

In the Press

According to the BBC Money-box programme, the financial Ombudsman estimates over 1,000 claims involving young drivers are being rejected by the insurance companies every year and this figure is rising year on year.

Things to note

An insurance policy is a contract based on trust and you are obliged to tell the insurer of anything that could influence their decision in issuing a policy. Not declaring the name of the principal driver is a fundamental breach.

If you have a policy cancelled

• Even if you made no attempt to make a claim, you will have to declare this in any future insurance applications, which may well, have an adverse effect on premiums

In the event of an accident and the insurer refuses to pay out

• The driver will be deemed to be uninsured
• The driver will be fined and will receive 6 points.(An automatic ban for new drivers)
• Someone will have to pay for all the claims
• Insurance cover will be difficult to obtain in the future

You may save money in the short term but live to regret it.