A lot of clients call us wanting to insure a vehicle in their child's name with minimum liability limits thinking they will save a lot of money. Also, the assumption is that by doing this the parents have magically removed themselves from further liability for the child's use of the vehicle. This is an incorrect assumption.
First the parents need to be aware that there is no coverage under their own Personal Auto Policy for any liability arising from the kid's use of his/her car, in fact there is an exclusion since they still live in the home. Therefore, if the child is involved in an accident, which is an at fault accident, they'll only have coverage under the kid's auto policy. Remember all the money supposedly being saved by those lower limits?
Example of an actual accident: Kid drives car home from Friday night game; buddies are in car a in partying mood; kid's car crosses line into oncoming traffic, strikes another car head on; two kids in other car die, another is severely injured; one passenger in kid's car dies when thrown from car on impact, two others injured. Let's assume for a moment that, indeed, the parents cannot be found liable for this accident for any reason. One of the great fallacies of liability insurance is that it's all about protecting assets. Having few or none, the need for liability coverage is lessened. What you've missed is that liability suits aren't just about recovering what the kid may have now. They also can attach what he'll have in the future. The boy that was driving is now at fault and the amount that the court decided is now attached to his future wages, FOR THE REST OF HIS LIFE and is excluded from any bankruptcy filings.
The second part of the common answer is the likelihood of the parents being drawn into the claim. Parents need to be aware that even when a child reaches the age of 18, there are countless other ways a lawyer can sue them for liability for the child's actions: ownership of the vehicle, vicarious liability, the child's continuing financial dependency on the parents or any other reason the plaintiff attorney wants to dream up. So the "savings" of having them on their own policy is lost, since the lawyers will most likely find a way to use the parents policy for liability. Such as using the Family Purpose Doctrine which is a rule of law that the registered owner of an automobile is responsible for damages to anyone injured when the auto is driven by a member of the family with or without the owner's permission.
The theory of this liability is that the vehicle is owned for family purposes. This doctrine is the law in some states instead of making a registered owner liable for damages caused by anyone driving his/her car with permission.
So, the next time you think "Should a kid's car go on a separate policy?", there's a simple answer. NO.
**Excerpts provided by Agent & Broker Magazine
for a $500 check (This drawing is held in the beginning of December, just in time for any holiday shopping).
First is that when you call, a person answers the phone. We are able to help you efficiently and quickly. Second, is when making a change you should always call us and not the company directly. This way we process the change. We generally receive the change before you do, so we can double check to make sure that the company did not make a mistake. If you call a company directly to make a change they may tell you to call us, which can be frustrating. We will look at ways to save you money during these changes as well as make suggestions to protect you better. 
