Finding car insurance fronting a tempting option? Read on to learn if it really is a good idea.
With car insurance being so expensive for drivers under 25 and P platers, it's tempting to just insure your car in your parents’ name. But this is a bad idea and it's called car insurance fronting. While it might seem like a good idea in theory, what you're actually doing is committing insurance fraud.
What do you need to know about car insurance fronting?
Insuring your car in someone else's name is called car insurance fronting and is technically insurance fraud. So while it is possible to get insurance on your car in another person's name, if you're involved in an accident and you need to file a claim, chances are your claim will be rejected or worse (getting convicted of fraud in NSW carries with it a maximum prison term of 10 years).
Generally, getting car insurance under your parents' name is only a realistic option in one circumstance and that's when your parents' are the primary driver of the vehicle, in which case it won't be car insurance fronting as you're acting in accordance with the insurer's terms and conditions.
If you're the main driver of a car and you've listed someone else in the hope to save money, you're committing insurance fraud.
Putting your name on your own car insurance policy isn't all doom and gloom though. The sooner your name is on one, the sooner you can start raking up time for a no-claims discount, which can save you heaps of cash in a few years.
Take out your own policy and start working towards your no-claims discount
How to get car insurance under your parent’s name without committing fraud
Rather than getting your parents' to take out a policy in their name and risking being caught for car insurance fronting, if they are the owner of the vehicle, you're better off getting listed on your parents' policy as a nominated or occasional driver. Typically it’s fine as long as the main driver of the vehicle is the policyholder.
Generally, the main driver must be the person who drives the car the most.
- If your parent is the main driver of the insured car, and you’re just an occasional driver, then you can generally just use your parent’s insurance to drive it.
- If there’s more than one main driver, then they might be able to become joint policyholders. In this case, both of their circumstances will be used to determine the premiums. If you’re the main driver of the car, but your parents also drive it, then you might be able to get lower premiums by taking out a joint car insurance policy. This may or may not be cheaper than simply taking out your own car insurance.
- If you’re the only main driver, or the only driver at all, then you will generally need to take out your own car insurance, and can’t get insured under your parent’s name.
What happens if an unlisted driver has an accident?
This is worth knowing, because it might be able to help you save on car insurance, and because it’s relevant if you’ll be driving under your parent’s car insurance as one of the vehicle’s occasional drivers.
Depending on the policy, car insurance might:
- Fully cover anyone who drives that car
- Cover everyone, but incur an additional excess for anyone not nominated as a driver
- Only cover specifically nominated people to drive that car
Often you’ll be able to choose which of the three you want your car’s insurance policy to do, although the range of options available might vary between insurers.
If you don’t tick any boxes or make any decision, it might default to either option 1 or 2, in accordance with the policy’s terms.
As you can probably guess, option 1 often has higher premiums because it essentially gives free rein for anyone to drive the car, while option 2 is often somewhat cheaper. Option 3 is often the cheapest, but means anyone who’s not listed on the policy won’t be covered while driving the car.
If viable, you or your parents may want to restrict drivers, with option 3, to help lower car insurance premiums.
What happens if I’m the main driver, but get car insurance under my parent’s name?
Even if it does help you save on car insurance in the short term, car insurance fronting is typically not worth the risk. Either way you’ll still be paying for car insurance, so you might as well get cover that can work more reliably.
If you want cheap cover, you might be better off simply getting cheap and all-important third party property damage liability insurance. It might cost just as much as a fronted comprehensive policy, but could deliver a much more reliable level of the most important cover.