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Hidden dangers of living with someone with lower auto insurance limits

What happens if you live with someone who has lower auto insurance limits?

How can living with someone with lower auto insurance limits affect you?

What happens if someone you live with, whether a family member, roommate or significant other, have their own policy and they have lower liability limits then you?

We do not typically ask those that live with us about their automobile liability limits, before we let them live in our home. But we should.

Let me illustrate the issue with living with someone with lower auto liability limits:

Your daughter, who resides with you, goes and gets her own auto insurance policy.  She is young and her assets are much less than yours.  Your daughter elects to pick the state minimum limits of liability coverage ($30,000/$60,000 in Maryland).  At this point in her life, she is just looking at the premium cost of the auto insurance.  She may not understand that even though her assets are limited now, if she does not have enough liability coverage her wages could be garnished to pay a claim.

Your auto insurance policy has higher limits of coverage of $250,000 per person/$500,000.   On top of that, you have a personal umbrella insurance policy to provide additional $1,000,000 in liability coverage.

One day, you are already running late, and your car will not start. Your daughter does not have to be to work till much later, so you elect to take her car to work.  (Remember, she has lower auto insurance limits than you.)

What could happen?

Well of course you are rushing to get to work, when suddenly, the car in front of you slams on their breaks. You try to stop but end up rear ending the car in front of you.

No problem, insurance follows the vehicle. And your daughter has insurance and her company will take care of the claim.

Fast forward a few months later.  You receive a notice from her insurance carrier.  It states that the state minimum limits of liability on your daughters auto insurance is not enough to pay for the damage and injuries that were occurred by the claimant.  Therefore, you will be receiving a lawsuit.

Immediately, you think, not an issue.  You have auto insurance coverage with great limits and even have an umbrella insurance policy.   And your insurance should pick up over top of your daughter’s as excess coverage.  But…..

Here’s the problem!

Your daughter is a resident of your household!

Because she is a resident of you household,  your policy will  NOT step down to protect you if you were driving her car.

Most auto insurance policies have an exclusion that kicks in if you live with someone with lower auto insurance limits.   The exclusion prevents your auto insurance policy and even your umbrella insurance policy from stepping up to provide additional limits for you, if the vehicle used is normally furnished for regular use or is owned by someone who is in the household.

So this situation is very different, then you traveling to Florida to visit relatives and use their car for a few days to sight see around town.

Now, I hear it all the time, “I do not drive my daughter’s car.”  That may be true, most of the time. But, if her vehicle is the last one in the driveway and you need to run to the store, or your vehicle breaks down or you wake up and your car has a flat tire that you will never get in her car.

You have higher limits of protection for a reason, you have a lot to protect.  You might own a home, boat, vehicles, have money in savings, or a nice job that you don’t want to have garnished for the rest of your life. Or you just might want to be socially responsible and if you caused damage or injury to someone you would want to take care of it.

Why do you want to risk everything that you own? 

That could happen if you live with someone that has lower auto liability limits than yours.

Make sure that everyone that resides with you have equal or greater limits than you do and understand the importance of liability coverage.

Don’t protect yourself sometimes, you need to make sure that you are protected all of the time. Remember, most accidents occur within 5 miles of the home.

Don’t let the quick run to the corner store cause you to be sued and not protected.

Huff Insurance is a Trusted Choice Independent Insurance Agency in Pasadena Maryland.

Do you have children, or anyone living with you, that needs to get their own insurance?  Contact us and let our professionals help you.

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