For a standard auto insurance policy, the coverage applies to the owner of the policy plus permissive drivers. The permissive drivers are those who drive the car occasionally with the owner's permission. For example, the coverage would apply if your cousin causes an accident while running an errand in your car.
For named auto insurance policies, however, the coverage only applies to the person whose name is on the policy. The coverage doesn't apply if anyone else causes an accident with the car.
Suppose you buy a named driver policy and list your spouse and child as the drivers. The coverage won't help if your cousin borrows your car and rear-ends another driver.
Features of Named Driver Policies
Apart from the limited coverage, a named driver policy has other unique features you should be aware of. Here are some of these features.
Not Universally Accepted
Auto insurance laws vary by state. At least one state, Texas, has banned named driver insurance policies. The Texas ban covers both renewals and new purchases effective January 2020. Auto insurance laws keep changing, and other states might soon follow Texas' lead.
One of the benefits of named driver policies is that they are relatively inexpensive. The low costs of the policies make sense if you consider that auto insurance is all about risk. With a named driver policy, the insurance company knows exactly the risks it is dealing with. With a standard policy, the insurance company covers unknown risks — the company cannot know how risky the permissive drivers will be.
Limited Number of Cars
A named driver policy carries a limited number of cars. According to thezebra.com, most of these policies limit you to four cars. Thus, you cannot name every driver you know on the policy.
Another good thing with named driver policies is that you cannot purchase one by accident. Many states have laws that require auto insurance companies to clarify, in clear language, their named driver policies. Thus, if you buy such a policy, you do so with clear knowledge of what you are getting.
Get a good understanding of the auto insurance industry and the available policies before making a commitment. Talk to an auto insurance agent for an in-depth review of the available options. That way, you will be able to make an informed decision on whether to buy a named driver policy or an alternative.
For more information about auto insurance, contact a company like Nelson Insurance Agency.
Purchasing insurance — the right insurance — is one of the smartest things you will ever do. While there are definitely differences between homeowners, car, life, and health insurance policies, they all serve the same purpose when it comes down to it. Insurance protects you against financial ruin should a tragedy happen in your life. In the case of homeowners insurance, that tragedy could be a fire or a flood. In the case of life insurance, that tragedy would be your death. The more you learn about insurance, the better the decisions you'll make when purchasing it. So dive into the articles here, and start reading.