Car insurance for grandpa? liability risk or higher rate

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MKB_new_investor
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Car insurance for grandpa? liability risk or higher rate

Post by MKB_new_investor » Fri Aug 11, 2017 11:04 pm

My father-in-law (Age 62) lives with us and drives our car. He has been on our insurance for 5 years as a secondary driver (~20% of the miles). A recent accident made us question if it is worth the liability of us owning the car. We have 50x his income and 100x his net worth. We I'd like perspectives on which of the below is best from a risk/cost perspective.

We see two options:
1) We continue to own the car and insure him on the car as we have been. I'm the primary driver and would continue to be. (Cost = $250/month for car + insurance on 2nd vehicle)
2) We sell him the car and pay for his insurance. He becomes primary driver and I'd be secondary driver (Cost = $350/month....$200/month for car + $150/month for our vehicle)

In option 1, It costs $100/month less however, if he is in another accident, we are liable and have a lot more income/net worth which someone could come after.
In option 2, We pay more, but have less risk as he owns the car as effectively has no net worth in case of accident.

Questions:
1) What is the risk in option 1 and is it worth the $100/month savings?
2) Does option 2 protect us from being liable in case of an accident?
3) Do I have to consider any tax implications of selling/giving him the car and/or paying for his insurance (which would be under a separate policy)

Additional information which doesn't really impact above but you may ask:
- My spouse travels for work so only drives the vehicles on the weekends. He is currently listed on both vehicles as a driver and would continue to be.
- Father-in-law mainly drives on local roads (<100/week) with the exception of 2-3 road trips per year (500-1500 miles/trip)
- We can easily afford the $100/month extra payment
- Car in consideration here is 10 years old (but runs extremely well) but we are not concerned about the value of the car.

Thanks for any perspectives.

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BL
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Re: Car insurance for grandpa? liability risk or higher rate

Post by BL » Fri Aug 11, 2017 11:25 pm

I might give him the car and pay liability on his car.

Why not list your spouse as second driver on your car?

By the way, do you have umbrella insurance? It could be a good general idea to give you extra liability protection.

Maybe someone more experienced will add something here.

You can each gift anyone 14k/year with no federal reporting requirements. Motor vehicle laws vary according to state laws.

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Watty
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Re: Car insurance for grandpa? liability risk or higher rate

Post by Watty » Fri Aug 11, 2017 11:47 pm

It would be good to call your insurance agent and ask what your options are. With him living with you there may be some issues because if you drop the insurance in his name you could still occasionally lend him one of your cars.

If you give him the car then there is still a risk that you could be sued if he is in a bad accident. This happens with teenagers sometimes when parents give a teen a to own in their name thinking that will prevent the parents from being sued. Whether or not someone suing you could win a lawsuit is less clear.

Having several accidents could also be a sign that it is time for him to give up driving. You might want to have him check with his doctor to see if there might be some medical issue that is impairing his driving ability.

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celia
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Re: Car insurance for grandpa? liability risk or higher rate

Post by celia » Sat Aug 12, 2017 12:01 am

I would think this would be similar to having a teenage driver in your household, except that grandpa has more driving experience. I had read in some of the threads that even if you put a car and insurance in a teenager's or young adult's name, the fact that he lives with you affects your liability too, particularly if you claim him as a dependent on your taxes. If his assets and insurance do not cover the damages awarded in a lawsuit, I think they can come after yours.

Of course, some of this may be state-dependent. But you need to find out what ALL your options are from your insurance company. You may also want to ask another insurance company, in order to compare rates (and see if their answers are similar for your situation).

MKB_new_investor
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Re: Car insurance for grandpa? liability risk or higher rate

Post by MKB_new_investor » Sat Aug 12, 2017 5:21 pm

Thank you for the replies. We are looking into an umbrella policy so glad to see we are thinking correctly.

Sounds are like the three of you are recommending to give him the car. I understand this may not remove all liability. We do not claim him as a dependent on taxes so that may limit the risk.

We did call the insurance company, they weren't much help in terms of how to reduce liability. Good idea to call a 2nd insurance company.

We are likely being overly cautious, he has had 1 accident in 5 years and it was a very minor one but did result in a small claims suit which I was not excited to have to deal with. We will definitely be watching his driving as I don't want to put others in danger.

simplextableau
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Re: Car insurance for grandpa? liability risk or higher rate

Post by simplextableau » Sat Aug 12, 2017 5:51 pm

If you retain ownership of the car, you're at risk for a negligent entrustment claim (basically, that you should have known he was unfit to drive).

Iridium
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Re: Car insurance for grandpa? liability risk or higher rate

Post by Iridium » Sat Aug 12, 2017 5:58 pm

MKB_new_investor wrote:
Fri Aug 11, 2017 11:04 pm
Questions:
1) What is the risk in option 1 and is it worth the $100/month savings?
2) Does option 2 protect us from being liable in case of an accident?
3) Do I have to consider any tax implications of selling/giving him the car and/or paying for his insurance (which would be under a separate policy)
1) This is very state dependent. For example, my understanding is that in D.C. you would be held fully liable for any accident. In Virginia, you would not be liable at all. In CA you would be liable up to $15-20K. The term you are are looking for is Permissive Use Liability. It is a pretty esoteric aspect of the law so you should do your own searches on it for your own state.

2) It would protect your from liability of accidents while he drives his own car. As that your FIL would have an absolute right to drive his own car, there is absolutely nothing that you could have done (short of a criminal action such as theft) to prevent any accident that may occur. Therefore, it would be a nearly impossible uphill battle to argue that you were negligent. While, I suppose a lawyer could try it anyway, they would be very unlikely to try to go for more than 'go away money'. In most states, you would still be potentially on the hook for any accidents you cause while driving his car.

3) Again, it is state dependent. In some states, you have to pay sales tax on the market value of the car. In others, there is an exemption for family members. The vehicle value would probably be reset to market value for vehicle property tax purposes. Depending on the value and the state's depreciation table, this could work in your favor or against it. The car's market value plus payments you make on his insurance would likely be considered to be 'gifts' for gift tax purposes. As long as the sum of all gifts remains below $28K/year, then it won't have any impact on your taxes or lifetime estate tax exemption. Don't assume that you would ever be able to get the car back. If your FIL has limited assets, then when his care needs increase, then the car would likely have to be sold to pay for his care before Medicaid would kick in.

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celia
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Re: Car insurance for grandpa? liability risk or higher rate

Post by celia » Sat Aug 12, 2017 6:02 pm

Someone on here once suggested that when you go someplace with him, let him drive once a month just so you can be aware of his driving ability. You don't have to call attention to that's what you're doing, but make a mental note of "bad habits" (we all have them) that could be improved with a refresher class, like at the Auto Club.

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celia
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Re: Car insurance for grandpa? liability risk or higher rate

Post by celia » Sat Aug 12, 2017 6:12 pm

Iridium wrote:2) ... that your FIL would have an absolute right to drive his own car, there is absolutely nothing that you could have done (short of a criminal action such as theft) to prevent any accident that may occur.
I disagree. Driving is NOT a right. It is a privilege. It can be taken away by the state or doctor who reports a health issue that makes him unable to drive safely. And there are things YOU can do to keep him from driving, such as hiding his keys. In fact, if he was intoxicated (as an example) and you let him drive, YOU could be held liable.

Iridium
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Re: Car insurance for grandpa? liability risk or higher rate

Post by Iridium » Sat Aug 12, 2017 7:01 pm

celia wrote:
Sat Aug 12, 2017 6:12 pm
Iridium wrote:2) ... that your FIL would have an absolute right to drive his own car, there is absolutely nothing that you could have done (short of a criminal action such as theft) to prevent any accident that may occur.
I disagree. Driving is NOT a right. It is a privilege. It can be taken away by the state or doctor who reports a health issue that makes him unable to drive safely. And there are things YOU can do to keep him from driving, such as hiding his keys. In fact, if he was intoxicated (as an example) and you let him drive, YOU could be held liable.
Fair enough point on intoxication (especially, if OP had served or made available the alcohol). For the other points, note that OP is neither a representative of the state nor FIL's doctor. While you do not have a right to drive and the state can take the privilege for any number of reasons, I would argue that you do have the right to not have that privilege interfered with by people who have no legal standing to make the decision. FIL is, I am assuming, an adult of sound mind, who is fully licensed to drive within his state of residence. I believe it would be a major uphill battle for a lawyer to argue that OP was negligent for not actively interfering in FIL undertaking an activity that the state has licensed him to do.

OP should, of course, carefully monitor FIL's driving ability to ensure that FIL does not become a danger to himself and others. Under the status quo, OP can retract permission to FIL, and that would be that (any attempt to drive the car at that point by FIL would fall under the same criminal statues as a 'joy ride'). Under option 2, even if OP hides the keys, FIL can hire a locksmith to create a replacement and continue driving. OP really doesn't have any ability to stop FIL from driving without FIL's consent, and that makes it difficult to argue that OP rather than FIL is responsible for the accident.

Of course, the above is all in the lens of the law. In reality, OP has a number of tools to obtain FIL's consent to stop driving, from gentle coaxing all the way up to (but hopefully unnecessary) issuing an ultimatum to give up the keys to the car or give up the keys to house. OP might be put into such a situation where he is morally obligated to use some of these tools to keep FIL and innocents safe from his driving. However, I see very little chance that OP would be legally obligated to do so, at least until FIL is no longer of sound mind.

munemaker
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Re: Car insurance for grandpa? liability risk or higher rate

Post by munemaker » Sat Aug 12, 2017 9:01 pm

Are you concerned about his age, meaning do you think a person at age 62 is not capable of driving a car safely?

I know people much older than that who have driven large motor homes or towed trailers for trips that are many thousand miles.

Unless there is some special issue, I wouldn't worry about a typical driver's ability at age 62.

Jack FFR1846
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Re: Car insurance for grandpa? liability risk or higher rate

Post by Jack FFR1846 » Sat Aug 12, 2017 9:07 pm

munemaker wrote:
Sat Aug 12, 2017 9:01 pm
Are you concerned about his age, meaning do you think a person at age 62 is not capable of driving a car safely?

I know people much older than that who have driven large motor homes or towed trailers for trips that are many thousand miles.

Unless there is some special issue, I wouldn't worry about a typical driver's ability at age 62.
Paul Newman won the GT-1 class at Lime Rock in his last race at age 81.

I had a coworker who at 57 was the worst driver I've ever encountered.

There are a LOT of horrible drivers out there. I would be very happy if every state required an annual driving proficiency test. I'd be even more happy if people were taught how to properly control a car. I was a high performance driving school instructor for a dozen years and with 4 20 minute sessions on the track, we were able to correct a lot of bad habits. Just paying attention puts you above the average driver.
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