As of January 1, 2020, any car insurance policy that includes a named driver component will no longer be a legal form of insurance. Read more to see what this means and what you can do to make sure you have valid insurance!
What is a named driver policy?
A named driver policy is a type of car insurance policy that, in short, provides coverage for only the drivers listed on the policy. In other words, any household resident aged 14 and above must be either included or excluded from the insurance policy. This kind of policy has allowed insurance companies to better estimate the risk associated with the policy because all drivers are disclosed on the policy. People choose this type of policy because the price is cheaper, but unfortunately the cheaper price means potential problems at claim time.
For years after this type of policy was introduced, some drivers were unaware they were purchasing this kind of policy. Many agents were not explaining the terms of the policy and the drivers were letting their household members drive their vehicles without being a listed driver.
These undisclosed drivers inevitably would be involved in accidents. Claims were being denied over and over due to the undisclosed drivers operating the vehicle. After many denied claims from the companies, many drivers became frustrated at the terms of these policies.
A Step in the Right Direction
In 2015, the State of Texas passed a law that required agents to read the following statement to individuals who purchased this policy at each renewal:
“A NAMED DRIVER POLICY DOES NOT PROVIDE COVERAGE FOR INDIVIDUALS RESIDING IN THE INSURED’S HOUSEHOLD THAT ARE NOT NAMED ON THE POLICY”
While this statement did ensure the drivers understood the terms of their policy, it had little impact on allowing their unlisted household drivers from operating their vehicles.
No Longer Legal
This brings us to the most recent law that will go into effect as of January 1, 2020. This type of policy will no longer be a legal form of auto insurance. It is important to check with your agent to ensure your insurance policy complies with the new laws. In the case that it does not, contact us - we have economical options for you!
Wendy Caplinger is owner and insurance agent at Neighbor’s Choice Insurance Agency, Inc. She has held her Property and Casualty Insurance License in Texas for over 12 years. She received her BBA in Finance from The University of North Texas and has 15 years of experience in the insurance and financial industries. Her interest and knowledge in insurance and finance, as well as her ability to see often unnoticed risk has allowed her to drive efficiency and growth within Neighbor’s Choice Insurance.