I received a call from a customer about two weeks ago. She asked me how much would it cost to insure a 20-year-old male driving a 1999, 6-cylinder Mustang, for liability coverage only. I started to ask questions about the young man and use of the car, and the customer said that she just wanted to know how much it would cost. I asked if he had insurance in his own name before or was listed as an operator on another policy. She said no. I asked if he had any history of credit in his name, and she said no. Having just quoted similar risks and knowing my markets were limited, I told her $500 a month. She said thank you and hung up.
Here is the problem. Most carriers require evidence of current insurance and some proof of insurance for the past six months. Once the young man has had insurance for six months, the placement of coverage and the premium charged would be significantly less. Insurance companies must have some basis for the predictability of the risk to price the coverage. Without that, the price charged is the highest on their matrix if they will insure it at all.
If you have a young driver in your household, you need to add them to your policy either as an occasional operator of all vehicles or a principal operator of the vehicle they primarily drive. Yes, it will significantly increase your premium, but what choice do you have?
If you do not report the young driver and they are involved in an accident, two things may happen. The first is that your company will go back to the date your young driver started driving and add them to your policy. That will create a significant balance due. They also may not offer to renew your policy because of the undisclosed operator. Once your policy has been nonrenewed it will have to be noted on future applications for insurance, and it may significantly affect the price you are offered. The claim will be covered since they had your permission to drive the vehicle, but you may suffer the consequence noted above.
If you are a driver who drives without insurance at all, you take even a greater risk. If you are involved in an accident and have no proof of insurance, you will be required to file an SR-22, provided by an insurance company once you actually get insurance. This requirement significantly decreases the markets that will insure you and substantially increases what you will have to pay for the coverage.
Remember, when you look at affording a car, include the cost of insurance as well as the cost of the car.
Dave Pushman is the former regional vice president of Geico in Macon and is now an independent insurance agent with Tidwell and Hilburn Insurance. He can be reached at firstname.lastname@example.org.