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Ask Joanne

Insuring teen drivers without breaking the bank Add to ...

I am renewing the insurance for my car and it's getting to the point that my teenage daughter is almost driving it more than I am. Do I have to list her as a main driver? What are the consequences of not doing this? - Anonymous in Ontario

With the downturn in the economy and more children living with their parents until well past their teenage years, determining the principal operator of the family vehicle is likely to be an increasingly common issue.

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The registered owner and principal operator are often the same person, but it is not always the case. "If you want a rule of thumb as to how to gauge the principal or primary operator of a car, it's who is in possession of the car most of the time. If it's your daughter, then you're obligated to let the insurance company know," says Anne Marie Thomas, manager of sales and business development at InsuranceHotline.com.

Insurance is about calculating and managing risk. Underwriters assess this, and assign a price or premium to the risk that the insurance company is taking on. These premiums are set using a number of factors. Drivers who are inexperienced, and those with at-fault claims, don't receive the same discounts as long-term and claim-free drivers.

If you incorrectly declare the principal operator of your vehicle, you may be in breach of your insurance contract, and thereby personally responsible for property damage or injuries if you're found at fault.

"Depending on how dishonest you are, it can actually make your policy null and void. It's not something to mess around with; you don't want the insurer to find out, and be having that conversation when you're hoping that they're going to pay you out for a claim," says Thomas.

"The rules can have slight variations from province to province, but what is called non-disclosure or a material change in risk is pretty much the same everywhere. It's contract law. The principles would be the same from province to province."

When most insurance companies look at who the primary driver is, they also look at the number of vehicles in the household, and the number of drivers. "If there's mom and dad and a son or daughter, and they've got two vehicles, they'll typically look at the person with the least amount of driving experience and rate them for a policy," says Pete Karageorgos, Ontario manager of consumer and industry relations at the Insurance Bureau of Canada.

What if your second vehicle happens to be a vintage Bentley that you wouldn't dream of allowing anyone else - let alone your teenager - to drive? In Ontario, a parent (or any policy holder) can file an excluded driver endorsement with their insurance company, excluding an individual from driving the specified vehicle. If they are found to be driving the vehicle, the policy can be cancelled, and in the event of a loss, there is no coverage.

Your insurer will also need to know if the vehicle is used for business purposes. Depending on whether your daughter has an after-school job, this may apply in your case. "The insurance application asks how many kilometres per year the vehicle is used for business. If you say 'none,' but your child is actually using the car to deliver pizzas, it's a complete violation of the policy conditions," says Thomas.

"If the insurance company assumes you're only using your vehicle for personal use, and they find out you've got 'Joe's Pizza' signs slapped all over your car at the time of a loss, they may deny you any coverage at all."

So, are there legitimate ways to lower insurance costs when you have a new driver in the house?

Many insurance companies offer discounts for students, particularly those who have completed accredited driver training programs. "A company I used to work for also offers a discount for students if they maintain a certain grade level in school. The reasoning is that if a young person is conscientious enough in their studies, they'll also be responsible and conscientious behind the wheel of the vehicle," says Karageorgos.

The bottom line is you must identify and declare who is operating your vehicle the majority of the time. Remember that premiums are much lower for young, occasional drivers than they are for young primary drivers. If you determine that your daughter is currently the primary operator of your vehicle and the premium is unacceptably high, why not encourage her to walk, take transit, or bike more often?

E-Mail your car-related questions to Ask Joanne at globedrive@globeandmail.com

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