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What happens to auto insurance when someone dies?

Here's what you need to know...

  • Auto insurance will stay in effect following death, but coverage won’t follow everyone
  • Failing to learn the rules and provisions could wind up in denied claims
  • If the named insured has a surviving spouse, the spouse will automatically have rights under the contract
  • The surviving spouse clause only applies for the remainder of the term
  • The executor of the estate is covered to drive a vehicle if the car if they’re making a trip to maintain or preserve the car

In the midst of all of the grief and sadness that you feel after a family member’s death, one of the last things that will cross your mind is how to handle insurance. As the legal party assigned with the responsibility of handling your loved one’s affairs, your first instinct will be to arrange their celebration of life. Once you do begin to review insurance policies, your focus will more than likely be on life insurance, final expense and accidental death policies rather than personal lines insurance. Start comparing car insurance rates now by using our FREE tool above!

While filing a claim of life benefits may be a priority, it’s important that you address auto insurance coverage issues that can arise when the named insured passes away. Auto insurance will remain in force after the death of a policyholder as long as the premium payments are being made. Even so, it’s possible that the coverage that you’re paying for out of the estate won’t really pay off once your loved one is gone.

No one wants to file a claim just to discover it’s going to be denied due to provisions written into the complex auto insurance contract. This is why it’s crucial that you learn how to manage auto insurance risks before you get behind the wheel of the covered car. Read this guide, and you’ll see how auto insurance works in various scenarios after death.

Scenario 1: A Spouse Dies and There’s a Surviving Spouse

There’s a lot of confusion when it comes to the financial steps that you must take when your spouse passes away. While there’s a long list of different forms and documents you’ll need to review, it’s important that you learn how your auto insurance contract is drafted to transfer rights.

Many couples will purchase their auto insurance and list both names as named insureds, but this doesn’t happen in every case. Typically, only the named insured has the right to request documents and to make changes to the policy. If, however, only the spouse who passes away is named as a policyholder, the surviving spouse will automatically have contractual rights under the insurance contract. This referred to as the surviving spouse provision.

The surviving spouse provision doesn’t only allow the spouse of the deceased to make changes to the coverage or the drivers on the policy, it also extends coverage to the spouse if they were to drive the covered auto.

This happens because interest in the vehicle transfers automatically to the surviving spouse who’ll then need to decide whether they’d like to retain the car or sell it.

In the meantime, coverage will remain active up until the end of the term. The provision doesn’t extend rights and coverage to a spouse for more than a term. By that time, the spouse will need to decide if they should buy coverage in their own name or terminate it. Many companies will allow the spouse to add their name as the named insured and driver to retain business.

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Scenario 2: A Single Policyholder Dies and Leaves Car to the Estate

The surviving spouse provision isn’t all that difficult to grasp because there aren’t restrictions on how the vehicle can be used. Unfortunately, if the policyholder isn’t legally married at the time of death, managing risk can become a bit more difficult. This is because the coverage and rights don’t transfer completely to the legal representative of the estate.

If you’re the executor of the estate, you’ll be covered to drive the covered auto but only in restricted cases. You must be the party who’s legally responsible for the estate and must be able to show that the reason you’re driving the car is for the betterment of the estate. This is referred to as a legal responsibility to maintain and use the vehicle. Here are some important limitations you should be aware of when it comes to the existing insurance policy:

  • The executor of the estate or trustee who is legally responsible for the estate is covered to drive the car in certain scenarios.
  • The driver must be taking the car for repairs, maintenance, titling, or to court for the use to be covered.
  • The executor can’t drive the deceased’s car for personal use unless they’re a listed driver.
  • The legal representative can’t give another party permission to drive the car, even if it’s to maintain the car.
  • Claims for personal use will be denied by the adjuster.

What happens if coverage isn’t provided?

You should never assume coverage will automatically extend to you. It’s best to call your agent and ask about the provisions to see which applies to your situation. If you’re planning to drive the vehicle for personal use, you should consider adding yourself as a named insured to avoid complications if you need to file a claim.

Failing to add your name or to buy an extended non-owner endorsement or a named non-owner policy could land you in hot water and in court with an uncovered liability claim. If you do decide to transfer ownership in your name once the estate has been settled, you can buy a policy exclusively in your name to satisfy the state insurance requirements.

Cancelling a Policy When There’s No Insurable Interest

If the policyholder’s estate and spouse no longer have an insurable interest in the car, you can cancel the policy entirely. It’s best to wait until someone else becomes the registered owner of the car before any cancellation requests are sent. Be sure to check and see if you’re entitled to a refund of unearned premiums.

While some companies do charge a fixed fee for early terminations, the fee may be waived due to the circumstances.

As you can see, there’s a potential for pitfalls when it comes to managing risk after the death of a policyholder. The key is to understand your role and what you need to do. If you plan on keeping the car, you’ll need to get quotes for coverage in your name. Use an online rate tool, and price coverage before ownership transfers to you. Start comparing car insurance rates now by entering your zip code in our FREE tool below!

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