Question: What exactly is exclusion of designated person on auto insurance policy?
Answer: Basically the exclusion of a designated person on an auto insurance policy means that the named person on the exclusion form will not be covered by your car insurance coverages.
A named driver or designated person exclusion is an endorsement added to an insurance policy that states a specifically named driver that has access to your insured vehicle will NOT be covered by the insurance company to drive the vehicle as long as the vehicle remains covered under the terms of your car insurance policy.
This endorsement would be added to an automobile policy and specifically exclude from all coverage losses involving a named individual. It may be required when the underwriter is aware of a problem driver who might be allowed to use an insured automobile (e.g., the child of the named insured who lives in the household). In the absence of this endorsement and without excluding the driver, your insurance would no longer want to keep your policy with them due to the high risks associated with this specific licensed individual. A problem driver may be that the person has a suspended license, DUI conviction, etc.
Some car insurance companies may request that the driver be excluded or the risk that they pose as a driver is enough to cancel your policy. Or the policyholder may not want their rates to be affected due to a household driver who has multiple convictions, a DUI, etc. that would raise the premiums too high and thus, choose to exclude the person from their auto insurance policy.
Normally, the named driver exclusion applies to the designated person(s), regardless of where they reside or whether they are licensed to drive, until they are added to the policy and the person is approved in writing by the company as an additional driver on the policy. So at the renewal period of the policy, the person would continue to be excluded. To place the person back on the policy the policyholder would need to specifically take off the exclusion from the person and add him or her to the policy as a driver.
The Designated Persons Coverage Exclusion endorsement on an auto insurance policy does not take away liability from the excluded driver or car owner if the excluded driver does operate the vehicle. So if the car owner allows the excluded person to drive their vehicle and cause an accident, then both the driver and the car owner normally can be held personally responsible for the damages caused and the insurance company will not cover the accident at all due to the exclusion.
To allow an excluded driver to operate your car can be quite costly if they are in an accident, so anyone that excludes a driver should not let that driver operate the car, even in an emergency, since there will be no insurance coverage extended to the situation at all. And in some states, even if an excluded, thus uninsured, driver is not at fault in an accident, their claims can be limited. For example, in Louisiana, even if the excluded driver is not at fault, they cannot make a claim against the at-fault party for the first $10,000 of injuries or damage to the vehicle.
A designated person exclusion can be required by the insurance company or requested by the policyholder; either way the exclusion of a specific driver should not drive the car they are excluded from because they will not have insurance coverages from the auto insurance policy extended to them.