How Named-Insured Auto Insurance Plans Work

Many drivers carry cheap auto insurance policies that apply only to the named insured on the policy and no one else while driving. That means many vehicles in states with such coverages legally can be driven by only the person named and no one else for insurance to apply. It also means vehicles owned by people with such policies are illegally driven if anyone other than the named driver uses it to travel public roadways.

In Texas, more than a million motorists have named-insured auto insurance policies, but state lawmakers say the insurance plans are too vague and can make motorists think the insurance protection extends to family members and others when they do not. It also means more than one million vehicles at times could be driven with no state-mandated auto insurance in place if anyone other than the person named as being insured is behind the wheel while on public roads.

The proliferation of such auto policies leaves other motorists vulnerable to being involved in accidents caused by uninsured drivers. And if those motorists are not protected with uninsured motorists coverage, their car insurance plans will not pay for damages, which could lead to even greater financial and other problems. If a vehicle is financed and has full coverage insurance but no protection against uninsured motorists or not enough to cover damages and other costs, the person who financed it could wind up owing a finance company a great deal of money.

To help remedy the situation, Texas lawmakers recently enacted a law mandating the named insured auto insurance plans specifically named the person or people allowed to drive the vehicle on public roads as well as other limitations in coverage. It is common in Texas and other states for a motorist to purchase a vehicle and insure it for as little as possible so others can use it who otherwise cannot drive. Those people might be banned from driving due to legal infractions, do not have drivers licenses for any number of reasons or just plain can’t afford to buy a vehicle and insured it.

Some states have about 25 percent or more of motorists driving with no state-mandated auto insurance, which not only violates the law but also leaves other motorists vulnerable to having to cover the costs of any damages or medical bills arising from accidents involving uninsured motorists.

In Texas, the problem has affected thousands of motorists who were in accidents involving vehicles driven by drivers who were not named on the cheap auto insurance policy insuring it. When the insurer denies the claim due to the driver not being covered, the other motorists were victimized a second time by having to cover the costs themselves or file an insurance claim that might result in their rates rising as a result.

In Texas, auto insurers now must list the named insured and coverage limits on the cheap auto insurance policies and proof of insurance cards so police and other motorists instantly know if the driver legally was operating the vehicle.

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