Tempted to front a car insurance policy so your adult child can save money?
Welcome to Day 2 of this six-day series on the simple things people can do to stay out of the magistrates court.
In this series, I’ll show you everyday mistakes people are making which are costing them money, points on their licence, and/or unnecessary criminal convictions.
Today, I’m talking about parents who take out insurance on their child’s car – and then add that child as a named driver
Imagine having a 21 year old son. He’s desperate to buy a car – and he finds and buys a wonderful BMW or Mercedes.
But your son didn’t anticipate how much it would cost him to insure his wonderful new car.
You/your son comes up with a cunning plan that will save your son thousands on car insurance:
Dad insures son’s car – and then adds son as a named driver.
Brilliant?
This move could land you and/or your son in some seriously hot water. Here are some examples how:
No Insurance, s143 Road Traffic Act, 1988
If your son is stopped by police, he could be found liable for driving with no insurance, contrary to s143 of the Road Traffic Act, 1988.
How can it be “no insurance” where there is a policy with your son’s name on it?
All insurance contracts are governed by the principle of, “uberrimae fidei” – which means, “utmost good faith”.
If your insurance company suspects you of “fronting” the policy for your son, they may consider that your policy is “void since inception” because you were not completely candid with them when you took out the policy on your son’s behalf. Or, to put it another way, the reason why your son did not take out his own policy is because he wanted to save money. That’s the true position – and not utmost good faith. Had the insurance company known that when you took out the policy, they would have charged you more.
Your insurance company saying that the policy is “void since inception” because you did not act with utmost good faith means that your son could be found to have been driving with no insurance.
The penalty for driving with no insurance is 6-8 points, plus a fine, plus prosecution costs, plus a government mandated victim surcharge.
The fines maybe the least of your son’s worries. What if he’s a new driver? 6 points would mean that he has to re-qualify for a licence. How much will that cost?
But wait, there’s more!
Making a false statement to obtain insurance, s174 of the Road Traffic Act, 1988
If the insurance company decides that you did not show utmost good faith, the matter could descend into an even bigger nightmare. Read what s174 of the Road Traffic Act, 1988 says:
(5)A person who makes a false statement or withholds any material information for the purpose of obtaining the issue—
(a)of a certificate of insurance .. under Part VI of this Act, or
(b)of any document issued under regulations made by the Secretary of State in pursuance of his power under section 165(2)(a) of this Act to prescribe evidence which may be produced in lieu of a certificate of insurance is guilty of an offence.
The penalty for failing to comply with s174 of the Road Traffic Act, 1988 can range from a fine to two years imprisonment.
If s174 of the Road Traffic Act, 1988 isn’t enough, there’s also a possible charge under s2 of the Fraud Act, 2006.
Insurance Fraud, s2 Fraud Act, 2006
s2 of the Fraud Act, 2006 says:
1)A person is in breach of this section if he—
(a)dishonestly makes a false representation, and
(b)intends, by making the representation—
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.
(2)A representation is false if—
(a)it is untrue or misleading, and
(b)the person making it knows that it is, or might be, untrue or misleading.
(3)“Representation” means any representation as to fact or law, including a representation as to the state of mind of—
(a)the person making the representation, or
(b)any other person.
The issue for the court would be a) whether you have dishonestly made a false representation; and b) whether you intended in making that false representation to make or save money for yourself or another – or whether you intended to cause the insurance company to risk losing or losing money.
The penalty for a breach of s2 of the Fraud Act, 2006 can be 10 years for the most serious of cases, plus a fine.
My simple tip
Triple check the terms of your insurance – and ensure you are not exposing you or your adult child to criminal liability.