By Melissa Myers and Michael J. Tucker, April 2016 Issue.
Melissa Myers: We were recently asked a question about automobile insurance for households headed by same-sex couples and the considerations between being a married couple versus an unmarried couple.
Michael J. Tucker: As with most financial matters, we consider a variety of factors.
Myers: If two people marry, they can choose to combine their separate car insurance policies.
Tucker: Apparently, married people get into fewer accidents than their unmarried counterparts. In the world of car insurance, safer driving typically translates to lower rates.
Myers: So, if you recently tied the knot, contact your insurer to see if your newlywed status qualifies you for some savings.
Tucker: Unless your spouse has a terrible driving record!
Myers: Right! If one of you has a poor driving record, maintaining separate policies could end up costing you less. Combining the coverage on a low-risk driver and a high-risk driver will likely increase the low-risk driver’s rates.
Tucker: On the other hand, the total cost for both could still be lower because of other factors, such as multi-car or multi-policy discounts, for example.
Myers: Even if you keep the policies separate, however, your premium could increase. Why? Because insurance companies consider the driving histories of all family members living within the same household when underwriting policies, and having a high-risk driver under your roof makes you riskier by association.
Tucker: That’s right, and even if your spouse owns a separate vehicle and rarely drives yours, there may be instances when he or she might need to. And, since car insurance follows the car, your policy would have to cover the damage if your spouse has an accident in your vehicle.
Myers: Let’s switch gears and look at what an unmarried couple should consider when reviewing their automobile insurance policies.
Tucker: If the two individuals live in the same household, they may be able to get the same insurance policy with the required coverage for their vehicles.
Myers: Couples must find insurers who will insure unmarried individuals on the same policy – which has become much more common in recent years.
Tucker: Just like a married couple, when an unmarried couple that lives together combine policies, they may enjoy a lower premium compared to taking on two separate policies. Both parties may also be able to take advantage of the same discounts.
Myers: For instance, if the primary policy holder has different types of insurance under the same company, he may qualify for a multi-policy discount, which his partner would benefit from as well.
Tucker: A shared policy can also become a burden. If one half of the couple experiences incidents, such as moving violations or accident claims, they could drive up the auto insurance premium cost for all parties involved.
Myers: Again, if one person has bad credit or previous driving record issues, they could cause a higher premium or inability to secure the policy at all.
Tucker: Shall we discuss what happens if an unmarried couple breaks up and one moves out of the home?
Myers: Yes, that happens sometimes. Most insurance companies allow for a combined policy only if the drivers live in the same location. It is a best practice to notify your insurance company if this occurs and ask about your options.
Tucker: Yes, when an insured party fails to inform the insurer of material changes, the company can later refuse to extend coverage or, worse yet, refuse to pay a claim.
Myers: As is often the case, the best thing to do is contact your insurance carrier or, if you are shopping for a new carrier, tell them about your marital status, living arrangements and other insurance policies or needs.
Tucker: Thus, they can recommend the best approach to insuring you and your partner or spouse.
Editor's Note: This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax or legal professional regarding their individual situation. Neither Camelback nor Commonwealth offers tax or legal advice.
