Whose Name Should Be on the Policy?
This question is important because the person or persons the policy identifies as named insured(s) have more rights than other parties that are also insureds. It’s also important that the person or persons covered by the policy include the person or persons who legally own the auto.
What Does It Mean To Be Named in the Policy?
There is a difference between being named in an insurance application, being listed in the declarations page of a policy, and being a named insured. Being listed—or not listed—in the policy’s declarations does not mean a person is—or is not—an insured. Too many people pay little attention to this distinction.
The application requires driver information because it is used for underwriting and rating purposes, not coverage purposes. Whether or not a given driver is listed does not affect that driver’s status as an insured. However, failure to accurately complete an application by omitting one or more drivers might give the insurer a right to void the policy based on concealment, misrepresentation, or fraud.
How Is the Vehicle Titled?
Answering the question correctly is important because the person or entity that owns an auto has an insurable interest in it. To put it a different way, if insurance is written in Tom’s name but Dick owns the car, the situation gets complicated when the car sustains collision damage. Tom has insurance but has not suffered a financial
loss. Dick has a financial loss, but it is not covered by insurance.
Married couples often cannot remember whether they titled the car in one spouse’s name or both names. Parents sometimes buy a car for Junior, title it in his name, and then plan to insure it under the parents’ policy. Or they might title the car in their names but tell Junior to buy his own insurance.
To avoid problems, the person or persons in whose name the vehicle is titled should also be named insureds in the insurance policy.
The foregoing discussion applies to autos that are owned outright. When an auto is purchased with the aid of a loan, the lender should be named as a loss payee, and the purchaser should be the named insured.
Leased autos, which are increasingly common, create a more complicated situation. A leased auto is titled in the name of its legal owner, the leasing company. However, it is licensed and insured in the name of the lessee.
Why Should Both Spouses’ Names Be on the Policy?
Both spouses can be listed as named insureds on the declarations, and it is generally advisable to do just that. The PAP specifies that “you” or “your” refers to the named insured listed in the declaration along with a spouse residing in the same household. In effect, the PAP expands the definition of “you” to include spouses—but not under all circumstances.
If John and Mary Smith, a married couple that reside in the same household, are both listed on the declarations page, they would each be considered named insureds. If only John is listed in the declarations page, his wife Mary would also have “you” or “your” status, with many of the same rights accorded to the named insured—so long as she remains a member of the household.
The situation becomes dicey when spouses separate, as happens all too often. Assume the declarations page lists only John Smith as the named insured. His wife, Mary, is also in the household and thus attains many of the same rights (with “you” or “your” status) as her husband but is still not the “named insured.” If Mary and John separate and Mary moves out of the household during the policy period or prior to the
inception of the policy, she is still considered in the “you” or “your” category until the earlier of (a) the end of 90 days after her move from the residence, (b) the effective date of a new policy she procures, or (c) the end of John’s policy period.
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