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 can be tempting to get insured under a parent's’ name instead.
Car insurance fronting, as it’s sometimes called, might seem like a good idea but the reality is that you're committing insurance fraud.
What do I need to know about car insurance fronting?
It it possible? Yes. Will it void your parent’s car insurance and lead to claims being denied? Probably. Is a good money-saving decision? Sometimes.
Generally, car insurance fronting under your parent’s name is only a realistic option in a few circumstances, because in accordance with policy terms a car’s main driver will generally need to be the policyholder.
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.
When it will and won’t save you money
Getting car insurance under your parent’s name can save money because it can let you get car insurance at your parent’s prices. They’ll typically get cheaper car insurance than you because they’re over 25 years old, and have the benefits of being experienced drivers.
In rare situations, like if your parents have a long history of car insurance claims or are just really bad drivers, you might actually get higher prices when insured under their name.
In the long run, it might also lead to premiums spiking once you do move to your own car insurance down the line. This is because you won’t have any car insurance record of your own, and if you’re a genuinely safe driver then insurers might assess you as higher-risk than you actually are.
Without a car insurance record of your own, insurers might simply assume you’re a new driver, and raise premiums accordingly. In the long run it can be worth just taking the higher premiums, driving safely and (probably) watching them drop year on year as you prove yourself on the roads.
When it’s not possible, or might void your car insurance
Generally, the fine print of car insurance policies spells out the rules, one of which is that you can’t lie on your car insurance application for the purposes of saving money. If you are found to have done so, insurers may deny your claims.
This is because you’re lying for your own gain and costing the insurer money by doing so, and therefore might technically be committing insurance fraud.
Consider taking out your own policy
How to get car insurance under your parent’s name without committing fraud
You can generally only get insured under your parent’s name as long as they’re the main driver of the car, or you’re also listed alongside them as a policyholder. Typically it’s fine as long as the main driver of the vehicle is the policyholder.
These listed policyholders are going to be used to determine the car insurance premiums.
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 reign 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.
Jim gets car insurance under his parent’s name.
To help save money, Jim got comprehensive car insurance for his own car under his parent’s name. Unfortunately, after some distracted driving he got into an accident, crashed into someone’s house and found to be responsible for $400,000 of damage.
For a smaller claim his insurer might not have investigated in detail, but for a claim of this magnitude they figured it was worthwhile. After an hour of investigation and the help of traffic cameras, they discovered that Jim had been driving the car to work every day for a year, and his parents never got behind the wheel.
Jim’s insurer denied the claim, so he spent the next thirty years having his wages garnished to pay for the damage. In hindsight Jim realised that getting insured under his parent’s name was a terrible way of saving a few hundred dollars.