By 
Parents who add their children to their car insurance policy to save them money may be making a costly mistake – and even committing fraud.
Car insurance premiums for those aged 18 to 25 average £1,474 a year, and can be even higher. To get around this, parents often put their children on their policies as a named driver. This lets the child drive the parents’ car, so long as they do not drive more miles than the main policyholder.
Another common approach is for a parent to buy an additional car, insure it in their name but let the named driver use it more often. Yet drivers in this situation are likely to be inadvertently breaking the law.
Firstly, if a named driver is actually the main driver of a car, this is insurance fraud known as "fronting". The insurance premium is meant to reflect the risk to the insurer of a claim being made.
Insurers understandably do not want to charge premiums at a level that is lower than the true risk that the car is involved in a accident. If caught, the policy will be voided and those involved can be prosecuted.
Being caught fronting can also make it harder to get insurance in the future, as your details may be put on the Insurance Fraud Register, a list of criminals that any insurer can access. Being put on this list can also make it harder to get other financial deals, such as mortgages.
A spokesman for Compare The Market, the price comparison website, said: “It’s an easy trap to fall into but it’s against the law and the consequences are likely to be more painful than a simple rap on the knuckles.”
Putting a named driver on a policy can increase the cost, unless insurers view this extra driver as safer than the main one, which is almost never the case with parents and children. If the child makes a claim as a named driver, the cost of the overall policy will increase.
There is also an issue with no claims discounts, which allow reductions to insurance premiums through a record of proven safe driving.
As most car insurance policies will not allow named drivers to build up a no claims discount, as soon as these novice drivers want to buy their own insurance they will pay more than they would otherwise. If a named driver crashes a car, the main driver could also lose their no claims discount.
So-called “multicover” insurance policies will allow younger named drivers to build up a no claims discount. Another option is telematics-based insurance, where a black box fitted to the car rewards safe driving with lower premiums.
Comments