When your teen gets a learner’s permit and then a license, you should be aware of how your liability car insurance works to protect your family should the teen driver have an accident. Your liability insurance may extend to your newly licensed teen driver during a grace period until added to your policy, but that’s not always the case, so you need to notify your insurer once your child begins the licensing process.

Will my liability insurance automatically cover my teen driver?

Never assume there is automatic liability car insurance coverage for a newly licensed 16-year-old driver. While your insurer may automatically cover your child for a certain period of time until you add him or her to the policy as a driver, insurance company guidelines vary, so you should find out your provider’s rules and guidelines as your child starts the licensing process. 

Insurance company guidelines differ but in general insurance carriers will require you to list all licensed drivers in your household on your insurance policy. If you have a 16-year-old who got his driver’s license, you should inform your insurance company.

Some insurers require you to add teen drivers to your policy once they get a learner’s permit, while others allow you to wait until the child has a driver’s license.

If you don’t add your teen to your policy and he or she gets into an accident, you’ll have to pay for damages. In some cases, the insurer will cover the at-fault accident of a teen driver that wasn’t listed on the policy, but only after you pay the premiums that should have been paid for the child to be on the policy and properly covered. Our parents’ guide to insuring teen drivers has more details on the recommended steps to take when your teen is getting licensed.

Does a parent have any liability or financial responsibility for a child who causes damages in a traffic accident?

In most states, the parent of a licensed minor has liability and financial responsibility for accidents caused by their teen driver under age 18. In many states, parents and guardians must sign their teen’s driver license, stating they take financial responsibility for the child until they turn 18. This means having the proper insurance on the teen driver and being held liable for any damages the child may cause in an accident.

State laws differ, so if you want to find out if your assets are at risk by your minor child having a driver’s license and operating a vehicle on the roadways, check with your local DMV or an attorney familiar with the type of state law.

For instance, the California Department of Motor Vehicles states that a minor’s application for a driver license must have the signatures of:

  • Both parents, if the parents are California residents and have joint custody, or
  • Both parents, if divorced, with joint custody, or
  • One parent, if that parent has custody, or
  • Guardians of the minor, if neither parent is living or has custody, or
  • The person(s) having actual complete custody if no legal guardian is appointed.

Nonresident parents cannot sign the application form and cannot accept liability for a minor in California. Nonresident military parents stationed and living in California can sign the application form and accept liability for a minor.

When parents or guardians sign for a minor to get a driver license in California, they are stating that they will accept financial responsibility for that minor. Financial responsibility in California requires that drivers and vehicle owners carry the following minimum monetary limits:

  • $15,000 for injury or death of one person per accident
  • $30,000 for injury or death of two or more persons per accident
  • $5,000 for any property damage per accident

In California and other states if the parent owns the vehicle the child was driving at the time of the accident, then the parent would have vicarious liability again as the car owner. If you have a child that has a driver’s license, you should make sure you have insurance coverage with limits high enough to cover your personal assets. An umbrella policy may help you be able to do so better than just a car insurance policy on its own.

My son is 18 years old and still lives at home. Does it make a difference to my liability for an accident if he has his own policy and is the sole owner of his car?

It will depend on state liability laws if your son’s actions could affect your own personal liability. If your adult son is still claimed as a dependent on your taxes, then in some states you can still be held accountable for negligent actions in which he might take part.

Typically, parents won’t be held liable for an 18-year-old driver if the child owns the car he drives and has his insurance policy. You as a parent have not provided him with the vehicle so he should be held responsible for an accident he is at fault in. Again, state laws will be the guide for this so you will want to check with a lawyer familiar with your state and local liability laws to find out. 

If you find out that you can be held responsible for your son’s actions, even though he is now an adult, you may want to obtain an umbrella insurance policy. This type of policy can help you protect your assets.

— Michelle Megna contributed to this story.

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Contributing Writer

Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions. When not writing, you can find her reading a book or watching anime.