Roommates Effect on Insurance Rates | Cheap Car Insurance
By Aaron Crowe
Having a roommate can lead to savings in a lot of areas: Rent, utility bills and commute costs can drop with someone to share them with.
But as anyone who has ever had a roommate knows, there are downsides to sharing a room, or even a house, with someone you don’t know too well. Their poor driving record that you may not know about can hurt your car insurance rates — even if you don’t allow them to drive your car.
Why you’re paying for your roommate
Just as your parents would list you as a driver on their auto policy if you lived at their home — because it’s assumed you’ll borrow their car — the same goes for having a roommate at your home or apartment. It’s assumed your roommate will borrow your car, sometimes even without your permission.
“If they have a good driving record it can help you, but mostly, having additional drivers is going to increase your premium,” says Chrissy Nigro, chief financial officer at Nigro Insurance Agency in Philadelphia.
If you both have car insurance, it may not be necessary to alert your insurer that you have someone else in your house who could be using your car. Still, it’s a good idea to call your agent and ask if they need such information, especially if the roommate may driver your car once in awhile.
If your roomie has had a DUI, for example, some insurance companies might outright reject you as a customer, Nigro says. Others may almost double your rates, she says.
Whether your roommate is a good or bad driver, it’s smart to tell your insurer that you’re living with another driver, and provide their name, driver’s license number and date of birth so the insurer can look up their driving record.
“Every licensed driver living in the household is rated on the policy because insurance companies assume that there is a possibility that your roommate will use your car at some point,” says Lisa Radov of Gebco Choice Insurance. “Therefore, they will charge you accordingly.”
You can exclude your roommate from your policy, but that means they can’t drive your car. Some states, however, such as Michigan, Kansas, New York, Virginia and Wisconsin, don’t allow a driver to be excluded from a policy.
“If your roommate is not listed on your policy but drives your car anyway, your rates may increase when the company discovers that there is another driver living in your household and using your car,” Radov says.
“The companies usually find this out when the roommate has an accident,” she says. “The companies may cover the accident but then may go back to the time of the accident or even the beginning of the policy and charge for the roommate.”
Even in an exclusion, if the roommate took your car anyway and got in an accident, you’d have to say they took your car without your knowledge so you can have your car covered, Nigro says. In other words, they stole it. That could lead to a difficult situation at home.
Also, if they’re not listed as a driver on your insurance and they get in an accident in your car, your car and the damage it causes will likely be covered by your insurance, but the medical coverage might not extend to the roommate driver, Nigro says. Anyone they injure in the accident could come after your assets after your insurance limits are reached.
“If they do have a bad driving record, it will affect your rate,” she says.
Lend your car, lend your insurance
One rule of thumb in auto insurance is that the insurance coverage follows the car, not the driver. Whether it’s you or some drunken roommate who crashes your car, your insurance is meant to cover your car if it’s in an accident.
“You’re lending your car, but also lending your insurance, essentially,” Nigro says.
The accident goes onto your record and your rates will likely increase, she says.
If the roommate has their own auto insurance policy and they crash your car after taking it with your permission, their coverage will kick in when your coverage limits have been reached, she says. If they didn’t get your permission first, then their coverage would start first, she says.
If you have a deductible, you’d have to pay that first. Getting that extra money out of your roommate at the end of the month when the bills are due could be difficult.
Aaron Crowe is a journalist who covers the auto industry for CheapCarInsurance.net.