I Gave My Grandchild My Car. Do They Need to Buy Insurance?
Some grandparents give up driving right around the time their grandchildren start. And not wanting to let a perfectly good car to go to waste, they might want to pass their car on to those grandchildren who are just learning to drive. The only catch is that giving someone a car isn’t as simple as just handing over the keys. Grandparents, parents, and teenagers need to worry about ownership and, more importantly, automobile insurance.
For a motor vehicle to be driven in virtually any state, it needs to be insured, but who ends up paying for the coverage? The answer to the question often comes down to ownership.
If your grandchild is the primary user of a car that's still insured and owned under your name, he or she needs to be added to your insurance policy. Because ownership of the car hasn’t changed hands, you, the primary policyholder, are still financially responsible for any damages caused by motorists you let drive the car. For this reason, you may want to gift or sell the automobile to younger generations.
If you don't intend on driving the car at all anymore but don't want to transfer ownership of the vehicle directly to your grandchild, another option is to transfer it to their parents. The Illinois Department of Insurance points out that if the grandchild’s parents appear on the vehicle title, the young driver can be added to their policy. This may work out to be the cheapest option for all parties involved. However, because a high-risk driver is being added to an existing plan, the policy's rates will most likely go up as a result.
If your grandchild becomes the sole owner of the car, he or she will need to shop around for their own policy before they can legally drive. Luckily for younger people who aren’t licensed yet, it’s possible to get car insurance without a license if they have a learners permit and shop around. Finding a wiling insurer, however, may not be very easy, an it's likely to be pretty expensive. That's because statistics show young drivers are more likely to be involved in automobile accidents than any other age group.
As your grandchild gets older, and if they manage to maintain a clean driving record for at least three years, they can have their parents removed from the vehicle title and shop around for their own affordable coverage.