In January 2014, Texas passed laws limiting the use of what is known as Named Driver Policies, following the lead of other states that regulate auto policies of that type. The legislators felt that those types of policies could be considered substandard and did not adequately protect drivers. Many Texas citizens, however, are unaware of what this type of policy is or how it could affect them.
Named Driver Policy
A Named Driver Policy only covers certain drivers or vehicles on the policy. This means that only the person named on the policy is covered should there be an accident. The policy actually excludes others in the household, including spouses and children, from coverage when they are driving the family vehicle.
Named Driver policies were becoming a growing problem in Texas as they provided a cheaper method for drivers to get coverage. However, many times the consumer was unaware that the policy excluded others in the household from driving the vehicle, often only discovering the problem after an accident. In fact, the Texas Department of Insurance says that they have logged many complaints from consumers claiming that they were sold a Named Driver policy without being told what it meant. These policies were often sold by insurance companies whose primary customers are those who have members of their household with poor driving records or credit problems. By excluding them from the policy, rates are lowered.
The growing number of Named Policy sales in Texas led to the change in legislation that restricted the sale of such policies and required additional endorsements or explanations before that type of insurance was sold to a consumer. In addition to the number of complaints taken by the insurance department, many citizens suffered losses when they were involved in an accident with someone who held a Named Driver policy. They were forced to file a claim with their own insurance company in order to cover their damages.
When buying car insurance in Austin or other Texas cities, it is important to discuss the policy thoroughly with a licensed, qualified insurance agent. They can answer every question and provide the proper coverage for every household’s needs.