With the North Carolina auto insurance policy there is a relatively unknown loophole that could cost you or your adult child a lot of money.  This loophole is triggered if they are driving a car you own and insure but they don’t live with you.  The solution to avoid this coverage gap is pretty simple but most people just aren’t aware that they have this problem in the first place.

First of all, let me cover the exact situation that can trigger this coverage gap, then I will explain the gap itself and give you a solution.  You will run into this gap in protection if you have a child who is over 23 years old and lives outside of your home but is still driving a car that is title in your name.  This happens so often as we help our kids out with a car and then want to keep helping them by keeping the car on our insurance policy to pay the insurance costs on the vehicle.  But this type of kindness is very dangerous.  I will explain.

The problem is not that your child won’t have protection driving his or her car that you insure on your auto insurance policy.  Not at all.  After all, you have insurance protection for that car spelled out on your policy.  The problem occurs when your child is driving a friend’s car and gets into an accident.  You see, since your child is an adult, living outside of your residence, he or she will have no excess protection for cars that aren’t listed on your policy.  So, assume your adult daughter is driving her friend’s car and has a bad accident where she is at fault.  Her friend’s auto insurance policy will pay the claim but her insurance company can then subrogate against your daughter for those losses.  Normally, your daughter could just have your insurance company pay for the losses, but since she is not a resident of your household and is over 23 years old, she will not have this protection.  And this could be a very expensive mistake.

So what is the easy solution?  Well, you should retitle the car into your child’s name, and have him or her purchase a personal auto policy in his or her name.  This will give them the excess coverage protection needed when he or she drives someone else’s vehicle.

North Carolina used car dealers insurance starts with the garage insurance policy.  Many new start ups find their way to an agent who is able to help them set up their garage policy and the begin selling cars.  And for many used car dealers, they just pay their renewal premiums each year without realizing that time is on their side.  You see, because of a law in North Carolina that requires insurance companies to offer you a policy when you ask for a quote, there is a two tiered system of policies in North Carolina.  If you haven’t checked lately, you might be in the high risk rate class and not even realize that you are paying too much for your garage liability dealers insurance policy.

Since NC is a mandatory insurance state, all dealers who ask for an auto insurance quote must be offered coverage.  For this reason, most insurance companies can write a dealers policy but if they don’t specialize in used car dealers insurance, they will simply place your garage insurance policy through the state reinsurance facility.  This means you will have to pay the highest possible rate and you will face limited choices on how much liability insurance you can purchase.  And last of all, this market of last resort doesn’t offer you any dealers open lot coverage so you won’t be able to purchase comprehensive and collision insurance on your inventory.

Even insurance companies who specialize in used car dealers insurance in North Carolina may still place your policy in the higher rated North Carolina reinsurance facility.  Why would they do this?  Well there are several reasons and the reasons certainly change over time.  As I write this we are seeing many dealers forced to offer buy here, pay here financing in order to sell their cars.  The insurance companies don’t like this as it increases the chances that the dealer will be involved in repossessing a vehicle and the claims and losses that might be associated with that activity.  So, since they have to offer insurance at some price to those that call, guess what, if you do buy here, pay here financing, you may find yourself in the NC reinsurance facility. 

Another reason dealers end up in the facility pool with its higher rates is that they simply have not been in business long enough to develop a track record that helps the insurance company feel comfortable with their business practices.  Some companies require as much as 3 years experience before they will move a dealer into their preferred rates policy.  I have also seen this problem apply to dealers who wholesale vehicles and never take title to or possession of the vehicles they are selling.

If you are a dealer who used to do on site financing, wholesale, or if you simply bought your current policy when you had less than 3 years in business, there is a good chance that you might now qualify for better coverage at lower rates.  You might not be able to find these preferred policies from your current agent though.  The reason for this is that insurance for used car dealers is a specialty market and most agents just don’t have access to the preferred policies for used car dealers. 

At Clinard Insurance Group in Winston Salem, NC, we specialize in used car dealers and we insure over 300 dealerships across 5 different states.  If we can help you with an insurance second opinion on your garage insurance, or if you would like for us to give you a quote on your dealership insurance, please call us, toll free at 877-687-7557 or visit us on the web at www.TheAutoDealersHelper.com