Auto insurance varies from state to state. When you move to a new state, you need to convert your auto insurance to comply with your new state’s rules. We frequently deal with clients who have moved to Knoxville but have been extremely slow to update their driver’s license, car registration, and auto insurance. These clients rent a home or an apartment here, yet keep an out of state vehicle registration, driver’s license, and insurance. Mostly they tend to delay these changes until they are ready to purchase a home. Once they start the home purchase process, they look at moving their auto insurance, and frankly, this is too late. I recently insured a client (both home and auto) who still had auto insurance in Texas, but he had been living in Tennessee for 2 years! This is NOT a good idea. He had taken on a load of liability that he probably wasn’t even aware of. He was very fortunate he was not involved in an accident.
I often see people place themselves in situations that I would advise against. I’ll give you 5 reasons for keeping your insurance up-to-date.
Your auto insurance should be in the same state as your vehicle is registered. As soon as you move to a new state, I advise changing your car registration to the new state. In Tennessee you are required to register your car upon establishing residency. Other states have similar regulations. Auto insurance is a contract between you and your insurance company, and the insurance company writes each state’s contract specifically for that state. An insurance policy carefully spells out all of the responsibilities the “Insured” must comply with in order for their coverage to be in force. Most policies instruct the client to advise the insurance carrier without delay of any changes in the usage, principal operators, marital status, garaging location of vehicles, etc. It doesn’t matter if these changes happen during the initial term of the policy or any time afterwards. You certainly don’t want any questions at the time of an accident because your vehicle is registered in one state and your insurance was issued in another state.
The vehicle should be registered in the state where the driver lives. If your adult child takes a new job in another state, and permanently takes a car with them that is insured on your policy, then they should title the car in their name in their new state of residence. After titling the vehicle, the insurance should be written in their name. If a car is being garaged and driven in another state, the insurance company’s risk has changed. Your contract obligates you to inform your insurance company about this and any other changes.
The garaging address definitely makes a difference in the price of the coverage. Many clients want to keep their adult child on their policy because the premium is cheaper for the driver. However, the consequence of this decision can be devastating. If the title is still in your name, you have huge liability issues. Your insurance company can deny the risk at claim time. It is much better to transfer the title to the adult child. Recently, I saw a claim denied because a client said their car was garaged in a state with a lower auto premium, but the car was actually garaged in another state. The insurance company investigated after the claim and then denied the claim because the client had lied about the garaging address.
#3 Insurable Interest
In order to insure a car, you must have an insurable interest in the vehicle. If you title a car to your adult child but still carry the insurance, you technically do not have an insurable interest in the vehicle. I hear clients say their friends do this all of the time. It can be done, and sure it’s ok—as long as a NOTHING happens. But when a claim occurs, the rubber meets the road. When auto insurance companies investigate and discover a situation is not as represented, it never ends well for the client. That means at claim time, you have the worry of the accident and the additional stress of not having coverage for the accident. Any misrepresentation to the insurance company can be considered fraud, and the company does not have to pay the claim.
#4 Joint Tenants
Here’s another scenario that warrants a note your insurance carrier. You move in with your girlfriend or boyfriend and both of you have separate auto insurance policies. You might occasionally drive each other’s vehicles even if only to move one or the other out of the driveway. In this situation, you need to notify your insurance company that someone else lives in your household. Insurance companies want to know all of the risks associated with a household and withholding a driver can be a serious issue. Many companies have permissive use, but some of your nonstandard companies may not pay a claim if someone else is driving your car. Check with your insurance company to make sure you are covered.
#5 Driving for Hire
You’ve decided to use your car for Lyft or Uber to earn some extra money. Ride-sharing services are common now, but your personal auto insurance probably doesn’t cover ridesharing. Some insurance companies are more up to date on these types of policies now, but many still do not insure this risk. If your insurance company will insure this risk, you need an endorsement for it. This endorsement should add ridesharing coverage to your policy and outline the additional conditions of your coverage. Make certain you add the correct endorsement to your policy for this commercial exposure. Some states also require special licenses or permits for ridesharing. Regardless of whether your insurance company offers coverage or not, you must disclose to them that you are a rideshare driver.
And while we’re on this subject, when you are a passenger, do you know if your Lyft or Uber driver is insured? What happens if you are injured in an accident? Be sure to ask your driver to show their proof of insurance. One of my clients hires the same driver each time she travels to New York City. I was thrilled to hear that she had a long conversation with him about his insurance coverage. According to her, he was eager to discuss how he keeps his passengers and his property safe.
The bottom line is you are required by your insurance contract to keep your insurance company apprised of any life changes that might affect your contract with them. Whether you move to a different state or move the day-to-day storage of an insured vehicle to a different state, it might make a difference in your coverage or your premium. Additionally, complying with state laws about licensing and ownership are required by your insurance company as well. Finally, if you decide to become a driver for hire, be sure you and your passengers are protected.