How to Lose Insurance for a Car Accident

FAILURE TO LIST ALL DRIVERS MAY BITE YOU IF THERE’S A CAR ACCIDENT

In my last post, I discussed the importance of buying enough uninsured motorist coverage when you buy car insurance. It can make the difference between getting, or not getting, fair compensation for your injuries after a car accident. However, if you are not honest in your policy application, just because you buy such insurance does not guarantee that it will protect you.

Say you live in Paramus. You are single. In order to save expenses, you share a house with another single person. You also share a car. Because your housemate has a perfect driving record, you title the car in his name. Thus, you buy car insurance in his name too. You are careful to purchase at least $500,000 in liability coverage. You also buy the same amount of uninsured/underinsured UI/UIM coverage.

A few months later, an underinsured driver hits your car while you are driving it. You suffer terrible injuries. You miss much time from work as a result. So you retain a local car accident lawyer near your Paramus, NJ home.

The car accident lawyer files a lawsuit. He can obtain only partial compensation from the insurer of the other driver. The reason being that that driver only carried, say, $15,000 of liability insurance and has no assets.

Therefore, your attorney must attempt to recover the rest of your compensation from your own insurance company. You have $500,000 of coverage, so no problem, right?

HERE’S THE PROBLEM

But not so fast. A case just like this just arose in the New Jersey Superior Court. An appeals court ruled that your insurance company would not have to pay you any compensation. There is nothing that your car accident lawyer can do about it.

And it’s all because you were not listed as a driver on the insurance policy. According to the court, you might have had a chance for compensation in certain circumstances if you were a family member of the named insured. But you weren’t. That said, you should disclose all drivers when you purchase a policy, even family members. Or else you still risk a loss of coverage.

THE MORAL OF THE STORY

The lesson is clear. When you buy car insurance, don’t try and save money by not disclosing all drivers. To buy insurance that won’t cover you or a household member when you need it is a bigger waste of cash.