Auto Insurance Policy Rescission Failure To Disclose Young Drivers On Auto Insurance Application

Things that happen if you do not list your driver children on your auto policy

> by Ed Sneneh, Illinois Auto Insurance Agent, Chicago Illinois

All insurance policies are drafted based on a major principle in the insurance industry, the Principle of Utmost Good Faith. Utmost Good Faith indicates that each and every contracting party (the insured persons and the insurance companies) to the insurance policy is ethically and legally committed  to disclose to the other party all information and facts, which would affect the other party's decision to enter into the contract, regardless if this information is demanded or not.

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One of the main questions on almost all personal auto insurance applications is related to the fact the applicant of the insurance has listed all drivers in the household or members of the household who are over 16 years old. If the answer is no then the insurance company will not issue the policy without this disclosure. Insurance companies are entitled to know who potentially may  use the insurance which extends to the members of the household. Also they are entitled to reject certain classes of drivers (DUI drivers, for example), or charge extra for other classes (younger drivers, drivers with moving violation, etc.)

Most insurance companies look at failure to disclose younger operators as an attempt to cheat the insurers. Younger drivers normally pay more for auto insurance. Also, other drivers and insured who have no children think that not disclosing young drivers of other insured is not fair for them. It is not fair for Mr.  A who has no young drivers to pay the same amount of premium as Mr. B who has two children age 16 and 17, when they both have similar circumstances.

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Many people think that it is OK not to disclose their young children. Some companies, especially the preferred and standard companies, may just go ahead and pay for small claims caused by young undisclosed drivers. They key word here is 'small claims.' While the companies may be entitled to reject the claim, many of them decide to pay these small claims because it may not be worth it for them to fight the claims in the court of law, or because paying such small claims will work as a publicity for these companies. However, there are enough evidences that when the claim is big, all companies will dispute auto insurance claims incurred by young undisclosed drivers.

Risk of Auto Insurance Policy Rescission

Insurance applicants who do not disclose occasional operators and members of their households are taking big risk for declining their auto insurance claims incurred by the young drivers. All members of the household over 16, and all operators who are normal and frequent occasional operators of the insured vehicles (even if they do not live at the same household). Failure to disclose facts that could potentially change the way/ price the insurance company issues an auto insurance policy may lead to the 'rescission of the auto insurance policy.' Rescinding an auto insurance policy means that the company is canceling the policy from the initial date of the policy and that no insurance has ever taken place.

Applicants of auto insurance who have some of their household insured with another insurers are still required to disclose them on the policy. However, if those people were not disclosed on the primary insurance policy and they got involved in auto accidents involving a primary auto, then the primary auto insurer may end up rejecting their claim. In this case, a claim may be filed under the driver's own insurance policy with the other insurer, if that policy is still valid and inforce.

posted on Wednesday, April 5, 2017