You assume full liability for your under age children, so keep your wallet open. Or, you can avoid unpleasant events with a precise bulletproof asset protection system.
To quote a local paper regarding a West Palm Beach, Florida accident “The car was being driven by a 15-year-old sister who had only a learner’s permit and was at the wheel illegally.”
Do you have a problem child who is bent on seeking an unhealthy identity? The negligent action of your minor son or daughter could affect your own personal liability. You could be held accountable for the reckless actions of your minor children. I am not an attorney, nor am I dispensing legal advice, as a parent I’ve been there and done that; and I am sure that a Florida accident attorney finds these types of cases all the time.
I personally went around with my wallet open while my two sons were learning how to drive. Because I considered these to be minor infractions due to a learning experience and not willful negligence, it was easier for me to pay for the damage (usually under $500) than report it to the insurance company.
But consider this, if you have a renegade child under the age of 18 who takes matters into his/her own hands, has the tendency to be reckless, and willful, and decides to drive illegally, without permission, without your knowledge, you are held “primarily accountable” for the misconduct and damages they cause, in some cases even beyond the age of 18 because they live at home and “you own” the car and your son or daughter is insured under your policy.
If you sign your minor children’s applications for drivers license, permits, then you have “assumed the full responsibility” for your child’s negligence. For example in the state of Florida, the driver’s license of any person under the age of 18 must be signed and verified by a parent or guardian or other responsible adult willing to assume the obligation imposed under statute 322.09.
15-YEAR-OLD’S AUTO ACCIDENT IN WEST PALM BEACH, FL NOT COVERED BY AUTO INSURANCE UMBRELLA POLICY
But, you say…that’s why you have insurance, and that’s why you have an umbrella policy, just for this event, right? Well, you would be wrong. And, you would not like to find this hard fact of life, after a car accident where your child is held responsible.
Let’s consider the typical auto insurance policy. Do you know what’s covered?
- Bodily injury liability. Generally covers other people’s bodily injuries or death for which you are responsible. Generally, it covers the cost of a legal defense up to the amount specified in your insurance contract. IT DOES NOT COVER PUNITIVE DAMAGES. This coverage does not cover you, … or other people named in your insurance policy.
- Property damage liability. This covers you, if your car damages someone else’s property, car, fence, house, etc. caused by your accident. It too, covers for a legal defense up to the limits of your policy. IT DOES NOT COVER PUNITIVE DAMAGES.
- Comprehensive, other than collision. This covers your vehicle for incidences other than collision, for example if your car is stolen, damaged by fire, vandalism, etc. Your coverage is limited to your policy.
- Collision. This covers damage to your car when your car hits, or is hit by another vehicle, or other object. It pays for the amount of damage in your policy less your deductible.
- Uninsured Motorist, Uninsured property damage, Uninsured motorist bodily injury, … etc. I’m lumping these all in one category to get to the meat and potatoes, since it’s for covering yourself in case the other guy is not insured or under insured, or these days you have to consider illegal aliens hitting the road, illegally and without insurance.
- Umbrella Policy. In addition to an auto insurance policy and home insurance, most insurance people will recommend that you buy a “Personal Liability Umbrella Policy.” This is a “Supplemental Coverage” added to your auto and home insurance, that you already have in place. Some people refer this to as a “wealth preservation policy, for the rich.” This is a factual misconception of what an umbrella policy covers.
Depending on the nature of the claim, damages are first applied against the car insurance or home insurance, then to the Umbrella Policy. The umbrella policy is not the first line of defense against legal liability. If you buy an umbrella policy, you need to make sure what it covers, not all policies are the same.
Typically, umbrella policies cover personal injuries, injuries to others while on your property, and some forms of property damage in excess of your auto and home policy. IT DOES NOT COVER PUNITIVE DAMAGES NOR DOES IT COVER INTENTIONAL DAMAGE, OR NEGLIGENCE.
COULD THE 15-YEAR-OLD’S FLORIDIAN OLDER SIBLING BUY MORE INSURANCE TO PROTECT THEMSELVES FROM AUTO LAWSUITS?
Can you buy enough insurance? NO.
All insurance policies cover the actual damages (up to the limits of your policy), and provide for a first line of legal defense. In cases where the judgment is in excess of what’s covered, you are on your own. No insurance company will cover for more than you agreed to cover. An example: your underage driver, drinks and drives, and causes an accident. The damage is $1,500,000. Your auto insurance covers the first $400,000 (the amount of coverage in your policy) the umbrella policy covers the next $600,000 if you have a $1million dollar umbrella policy and you are on your own for the next $500,000.
Please note: I am assuming that your auto and umbrella policies do not take a position against you where the level of negligence was more than civil litigation, you could be faced with a criminal case which may not be covered. Is this a lot more than you bargained for? (Please note that I’m not a lawyer or an insurance agent, and state laws vary from state to state; consult with a motor vehicle, truck, boating, or motorcycle accident attorney in your area).
WHAT COULD THE OLDER SIBLING FROM WEST PALM BEACH DO TO PREVENT LAWSUITS AS A RESULT OF HIS/HER SISTER’S ILLEGAL AUTO ACCIDENT?
Can you do anything now, to avoid these unpleasant results if you have under age drivers? YES.
By repositioning (transferring) your assets to an irrevocable trust, you will no longer legally “own” a residence, you will no longer “own” a car, you will no longer “have” investment accounts, etc. Title to your assets will be transferred (repositioned) from you to the name of an independent trust with an independent trustee. You will no longer own assets. You can only be sued for what you own or have a direct control.
SIBLING’S FLORIDA AUTO INSURANCE COSTS COULD BE REDUCED AS WELL
With a proper system in some states, the cost of the insurance policy is substantially reduced, because the car is owned by a legal entity qualifying as a commercial motor vehicle, and the insurance is less than insuring under age drivers. Consult with your local insurance agent in most cases you should be able to secure a less expensive insurance premium because under a commercial policy, typically the car is insured, not the driver(s).
The sibling in West Palm Beach in this real-life scenario could have not just reduced his/her auto insurance costs but he/she could have protected him/herself from any further lawsuits as a result of his/her younger sister’s illegal accident.
In Massachusetts, my home state, when you get a ticket it’s against the driver, not the car, and since the car is insured (not the driver) the penalty points do not increase the insurance premium.
author bio - Rocco Beatrice, CPA, MST, MBA
award-winning estate planning & trust expert
MS - Taxation, Master of Science Taxation
MBA - Management / Taxation
BSBA - Management / Accounting
CPA - Certified Public Accountant
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