Often people don’t pay close attention to these things and arrange them as a matter of convenience. However, these terms are different from each other in many ways, including legally and practically. Choosing one over to other may come with advantages or disadvantages. This post will define each terminology and discuss the implications of either choice.
Most traditional families would not pay much attention to who is a joint policyholder and who is a listed driver on auto insurance. When there is no separation of assets, incomes and expenses and each member trust the other fully it may not matter. But there may be issues when people are keeping their half of everything separate. In that case, you may need to pay attention not to get tangled and held responsible for things you had nothing to do.
Named Insured vs. additional Driver
Named insured is a policyholder (usually joint) who has legal rights and responsibilities. They can make changes and cannot be removed without their prior consent. If the car is owned by two people who don’t have close ties as marriage this could be a necessary arrangement. Also, lenders or lessors may want to be included alongside the lessee or borrower instead of registering interest on it.
State regulations may force people to go down this route too. For example, some of them insist that only the vehicle owner can purchase coverage. If you want to arrange coverage for a car you don’t own this may be possible in some jurisdictions and with some carriers. Otherwise, you may have to make changes to the vehicle title so that you can buy joint car insurance.
On the other hand, a listed driver is a person who is explicitly allowed to use the automobile. Policyholders can take them off whenever they want as long as laws and carriers allow it. Also, a listed person would not have a say or would not be able to make a claim. Other people may be allowed to use the vehicle even though they aren’t listed either way. A standard policy normally covers everyone in the household and occasional drivers.
It may sound like it is a great idea to get your name written there but it has downside to it as well. Joint ownership of a policy means that you are equally responsible as well. They can be sued jointly or separately for the losses third parties suffered as a result of an accident in which the car was involved. It could totally be someone else who was behind the steering wheel at the time of the accident. As long as that person was permitted (not stolen) either or both would be open to law suits. This alone, convinces many partners to make separate arrangements to avoid being responsible for others’ mistakes.
You can get cheap joint policies if you are in a fully committed relationship. If you are in a relationship but still keep own affairs you should think twice. Besides, such arrangements make it harder to sort it out after divorce. Often people buy separate coverage and get listed in each other’s. That may be fine when each party keeps own automobile.
How it is set up may have legal and practical consequences and you should take time to digest them all and make a choice that suits your circumstances. All these decisions are fairly personal and based on relationships. It is best that partners go through options, discuss their benefits and problems and come to a mutually agreeable conclusion.
Named Driver Insurance
It is a type of policy that only covers the drivers listed and nobody else even if they are living in the same house. They may be cheaper but it may be problematic too, especially if you cannot keep others away from the keys.
Hopefully, you noticed the difference between “named insured” and “named driver insurance”. The former refers to legal ownership and rights and the latter refers to limiting people to only the ones who are clearly mentioned and excluding everybody else. The former can have a standard package that doesn’t come with any restrictions while the whole point of the latter is to prevent others so that the premium can be lowered or the exposure can be brought to acceptable levels.