Teenage Drivers and Auto Insurance Liability Limits

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My wife, 18-year-old son and I have a multicar insurance policy with a $300,000 liability limit. My son drives one of our cars daily, but the title is in his mother’s name. Are we financially liable beyond the $300,000 if my son causes an accident? And would it make a difference if the car were titled and registered in his name?

You could be on the hook for any damages above $300,000 if your son – or anyone in your family – causes a major accident. That is a good reason to boost the liability limits on your car insurance, especially if you have a teenage driver, and to consider buying an umbrella policy. With umbrella coverage, you can add $1 million or more to your auto and homeowners liability coverage, generally for $200 to $400 per year. See Why You Should Have Umbrella Liability Insurance for more information.

CALCULATOR: How Much Umbrella Insurance Do I Need?

If the car were titled in your son’s name, he could get his own insurance, which should limit your liability. But it can be very expensive for an 18-year-old male to buy auto insurance coverage on his own; it’s usually less expensive to keep family coverage with a multicar discount. See 8 Ways to Cut Insurance Costs for Teen Drivers for details.

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For more information about saving money on auto insurance, see 4 Reasons to Reshop Your Auto Insurance.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.