Someone recently asked us the following question:
Mom and Dad have a policy. Susie is listed as a driver (daughter). Does Mom and Dad’s coverage follow Susie when she rents a car on vacation? Susie doesn’t have insurance of her own.
Yes, no, maybe, somewhat?
First, let’s revisit who has coverage on the MA Auto Policy (MAP).
Part 2 Personal Injury Protection provides coverage for the named insured and anyone living with them in any auto.
Parts 3 Uninsured Motorists (UM) and Part 12 Underinsured Motorists (UIM) provide coverage to the named insured and other household members (that do not have their own policy). If a household member is not the named insured on any policy they get the highest household member policy limit. These limits should always match the part 5 limit and all part 5 limits should match for all personal vehicles insured.
Liability Parts 4 Damage to Someone Else’s Property and 5 Optional Bodily Injury to Others provides coverage for the named insured and household members using any auto with permission of the owner and an auto that’s not considered an excluded auto (like driving for work cement truck or bus or regularly used auto) while in the Unites States, United States territories and possession, Puerto Rico and Canada.
Part 6 Medical Payments coverage provides coverage for the named insured and household members in any auto, except excluded autos (like workers comp. related, no permission to use the auto, regularly used situations).
Will my health plan cover life flight in another state, what’s my deductible and how high do I want to insure here?
Parts 7 Collision, 8 Limited Collision and Part 9 Comprehensive also provide the named insured and household members with coverage for any auto except excluded autos (like regularly used) and will pay up to the actual cash value (ACV) of the auto at the time of the loss.
Now what is a household member?
As defined by the policy: it means anyone living in your household who is related to you by blood, marriage or adoption. This includes wards, stepchildren or foster children. As long as the daughter truly lives with mom and dad (her driver’s license, tax returns, etc. all list mom and dad’s address) and she has not been emancipated somehow and does not live elsewhere, we should not have a problem calling her a household member. Of course, lawyers, courts, insured’s and issues sometimes make this definition fuzzy.
Secondly, the issues one should look at as well are the limits mom and dad have on their respective auto coverage parts and umbrella liability policy. Parents are often worried about the damage done to the auto and the premium but not often enough about high limits for a bad accident and identifying what’s more important covering a $20,000 car or defending a serious bodily injury accident? If renting abroad, she needs to look for coverage first and organize the trip including an umbrella liability policy with a territorial definition of worldwide and no exclusions for this rental use. If Susie is driving in Naples FL and totals a $400,000 Aston Martin and mom and dad only have $250,000 for part 4 with no umbrella policy, she’ll need to get out a checkbook either immediately or in the future to reimburse the insurance company that paid their insured for the physical damage to the auto.
If Susie is traveling with a friend, the friend needs to be listed on the car rental agreement and not knowing how this friend handles an auto like our own daughter, we have another good argument to raise limits. If mom and dad have to rent the car in their names, the liability for the use of the auto will follow them. Since the daughter is under 18, mom and dad are still liable for the daughter whether vehicle is in mom and dad’s name or Susie’s (Florida statute 322.09).
Lastly, the rental car issue brings up many points to consider. The rental car agency often wants the auto to be replaced with a new one after a loss. The MAP
only pays for ACV. So if Susie rents a $20,000 car and it gets totaled or stolen, the rental car company wants the $20,000 to replace it not the $15,000 ACV payment.
The rental car agency gets $50 per day to rent the car and when they are not able to rent it because it is totaled or stolen; they still want Susie to pay for lost rental time. The MAP is ill equipped to respond, particularly where part 9 gives rental value for theft of entire auto and only $15 per day while part 7 and 8 do not provide automatic coverage.
Susie should purchase the Collision Damage Waiver (CDW) for one primary reason; walkaway-coverage. If she gets into a situation and the car is damaged or stolen, she can pay her deductible (if one exists on the CDW) and walk away from the car. Assuming there is no other property damage or bodily injury claims where Susie needs to us mom and dad’s policy, Susie does not get surcharged and often does not have to worry about the loss of use charges for the rental car.
Depending on Susie’s age she may not be able to rent the auto or be listed on the rental agreement. This means she does not have permission from the owner (rental car agency) and the MAP will not provide payment for parts 3 through 12. The MAP will also not provide coverage for parts 4 through 9 for regular use vehicles which could be a rental car we keep for over 3 weeks. So Susie may need to switch rental cars and rental agencies to hopefully avoid regular use issues.
Assuming Susie can rent the car, I would also tell her to give the rental car company a credit card that has a low chargeable limit, so that it does not somehow get charged with a $20,000 car. Susie also has to pay attention to places she cannot drive the car like Daytona Beach (off road) and out of the rental state.
If mom and dad are relying on their credit card company to pay for the rental car, they need to read their credit card insurance policy just prior to renting and confirm in writing how the credit card company will or will not pay (such as replacement vs. ACV and loss of use) and be aware of excluded autos that the credit card company will not cover. Also some credit card companies permission prior to renting an auto to have their coverage.
Lawyers, courts and individual situations could have an adverse effect on the above.
Car Rental Checklist
- Is my child a household member?
- Is my child a properly listed operator on my policy?
- Do I have high limits on all my MAP coverage’s?
- Do I have an umbrella liability policy in place that will cover where I am
- going and not limit what I am doing?
- Are all drivers listed on the rental agreement?
- Did I purchase the Collision Damage Waiver on the rental car?
- If renting for more than 2 weeks, did I arrange for another rental car with another rental agency (regular use issues)?
- Do I understand where I can and cannot use the rental car?
- Did I rent the car with a low chargeable limit credit card?
- Enjoy the trip.