Q. I have four young adult children — 17, 20, 22, 24 — who drive cars that I bought for them. The car titles and insurance policies are under my name. If there was an accident, could I be sued and possibly lose my house and savings? If I put the car titles in their names, will I reduce my liability to zero?
— Worried mom
A. That’s an important question.
The laws regarding parental liability for injuries or damages caused by a child in an auto accident or in any other incident vary by state, said Jodi Cirignano, a certified financial planner and certified public accountant with Lassus Wherley in New Providence.
“We recommend that you contact the insurance agent for your auto and homeowner’s policies to discuss your particular situation and what steps you can take to manage and reduce your personal liability,” she said.
Those steps could include retitling the cars in your children’s names, having each child to procure their own auto insurance and increasing your liability coverage, she said.
As a general rule, a car titled in your name is your property.
“If one of your children caused an accident and injured another person with your car, there is strong chance that the injured party will sue your child, the person who caused the accident, and you, the owner of the auto — as well as the person most likely to have financial resources,” Cirignano said. “Accordingly, retitling the cars in your children’s names may be a prudent step.”
If you don’t already have excess liability insurance, also known as umbrella insurance, you should talk to your agent about obtaining some.
Liability insurance provides an extra layer of protection against large personal liability claims by paying claims in excess of the liability limits on your auto and homeowner’s policies, she said.
“For example, if an injured party in an auto accident is awarded a $1 million judgment and your auto liability limit is $500,000 thousand, an excess liability insurance policy may cover the difference,” she said. “This coverage is inexpensive relative to the amount of financial protection and peace of mind it offers.”
Speak to your insurance agent, who will ask you some questions about your financial, family and risk profile to determine the appropriate amount of excess liability coverage for your needs.
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