Insurance Traps (The insurance alternatives)

Insuring a car that is owned by the parent.

Occasional use of the car
It is fine to allow your son or daughter to have occasional use of your car.

Regular use of the car
If your son or daughter has consistent use of your car the situation should be considered very carefully as you could be accused of insurance fronting.

Insuring a car that is NOT owned by the parent.

Unless you own the car you have no insurable interest and the insurance company would be within their rights to refuse to pay out on any claims

Insurance fronting

Insurance fronting is where parents use their no-claims bonus to insure a car for their son or daughter to regularly drive in an attempt to reduce the cost of insurance.

You are under an obligation to inform the insurance company of the identity of the main driver when you insure a car, it is wrong to assume that because you own the car it is acceptable not the tell the insurance company of the real details

Insurance companies are getting tough and stamping down!

If the car is solely or even predominantly used by the young driver the policy must be insured in the main driver’s name. If the insurer finds out they are very likely to cancel the policy or worse still, in the event of an accident, refuse to pay out or demand a substantial contribution from you.

In the Press

The Guardian recently reported on the 30th September 2006 that Kwik-Fit Insurance / Provident Insurance cancelled 800 policies, with 10 days notice, for exactly this reason.

Things to note

An insurance policy is a contract based on trust and you are obliged to tell the insurer of anything that could influence their decision in issuing a policy. Not declaring the name of the principal driver is a fundamental breach.

If you have a policy cancelled

• Even if you made no attempt to make a claim, you will have to declare this in any future insurance applications which may well have an adverse effect on premiums.

In the event of an accident and the insurer refuses to pay out

• the driver will be deemed to be uninsured.
• the driver will be fined and will receive 6 points.(An automatic ban for new drivers)
• Someone will have to pay for all the claims
• Insurance cover will be difficult to obtain in the future.