Auto Insurance Implications for Surviving Family Members

By Ryan Hurlbert on January 17th, 2010
Auto Insurance

There are many details that need attention when someone passes away. Changing auto insurance policy information is probably at the bottom of that list, but eventually it needs to be addressed.

There are three likely scenarios:

  1. A surviving spouse keeps the car
  2. The car is sold
  3. The car is given to a friend or family member

Surviving Spouse

If the surviving spouse decides to keep the car, make sure that the use rating on the policy is correct. Most insurance companies rate a vehicle driven for business higher than one driven for pleasure or commuting. Correctly rating the use of the vehicle could save hundreds of dollars a year.

Even if you commute in more than one vehicle, only one car should be rated as used primarily for commuting. Other vehicles on your policy should be rated as "pleasure use." Make sure the mileage you drive for each vehicle is accurately reflected in your rating--most companies offer a discount or lower rate if the vehicle is not driven much.

If the car is not going to be driven, but remains the possession of the surviving spouse, consider reducing the coverage to comprehensive only. Without liability coverage for the car it cannot be driven, but you are still covered for loss by theft, fire, etc.

Many people simply take the car off the policy altogether, but that could be more costly in the end. An auto policy that covers more than one vehicle may qualify for a multi-car discount--even if one car is covered for comprehensive losses only. Often, the discount is worth more than the cost of the coverage.

Check with your state for the insurance requirements for stored vehicles. Some states require liability coverage on any licensed vehicle, and you could be cited for removing that coverage.

Selling the Car

If you intend to sell the car, keep it fully covered until it is sold. If anything happens during a test drive, you want to make sure you are covered. Once it is sold, cancel your coverage. If the car was in storage and was only covered by comprehensive, add liability and collision to the policy before you list it for sale.

Give It Away

If you give the vehicle away to a family member or other loved on, transfer the title and cancel the insurance on the vehicle. The recipient of the car should get their own insurance policy.

When a family member can't afford their own policy, it may be tempting to let them use the car as their own, but keep it titled in your name and continue to insure it. It may be a nice thing to do, but you may be exposed to a host of consequences. Any tickets, accidents, or other claims incurred could cause your premiums to increase, or your policy to be cancelled. Your insurer could cancel you for not rating a regular driver on the policy.

Instead, it is best to transfer the title, and provide financial assistance when the premiums are due.

Protect Yourself

You should separate yourself from any potential liability, here are some things to keep in mind:

  • You should only get comprehensive coverage for a car in storage, but keep it on the policy. It is often cheaper to pay for the comprehensive coverage to maintain the multi-car discount than to drop the car from the policy
  • Never drive a car, or allow anyone else to, without liability coverage in place
  • While it may be nice to provide insurance on a car that a family member has been given, any accidents, tickets, or claims they incur may affect your rates. Protect yourself by transferring the title, and providing financial assistance when premiums are due

Any time you make changes to your insurance policy is a good time to shop around for cheaper auto insurance.

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