Ah, here comes summertime! Days of newly mown lawns, the crack of a baseball bat, fun in the sun and teenagers out of school driving around like maniacs.

Which, just like that, brings me to the personal auto policy and kids' cars.The basic scenario has been occurring with depressing regularity for far longer than the thirty-something years I've spent in this industry. Parents buy their kid a car and immediately get two pieces of fantastic advice from their trusted lawyer, CPA, financial advice columnist, priest, brother-in-law, neighbor or some guy in a bar (for some reason, seldom anyone with even fleeting knowledge of car insurance). These "experts" say that to save megabucks on their insurance premiums, the parents should title the car in the kid's name and insure said vehicle on a separate auto policy at minimum limits–or at least lower limits than the parents have on their own PAP. The thinking is that by doing this, the parents have also magically removed themselves from further liability for the child's use of the vehicle.Hardly a week goes by that this scenario doesn't pop up on the IIABA Virtual University helpline. This indicates two things. First, this question has become the insurance equivalent of the feast from the Eagles' legendary hit "Hotel California": "We stabbed it with our steely knives, but we just can't kill the beast." Second, far too many insurance folks still struggle with a response when confronted by parents enamored of the misguided advice above.Amazingly enough, the answer provided by insurance experts has remained nearly as unchanging as the query. Once again, there are two parts. First, the ISO PAP has an exclusion under Part A – Liability Coverage, which reads as follows:

The exception may offer some comfort to parents who, while remaining sensible about their own choice of vehicles, have opted to provide the child with the car of their dormant teenage fantasies. Perhaps a high-powered new edition of the venerable Ford Mustang? Or the modern version of the ultimate chick magnet of my high school years, a Dodge Charger SRT8? (If my son had one of those, I'd be swapping keys with him every chance I got! "Trust me, son, girls today love a steady, mature male–the kind who would drive a solid, dependable Dodge Grand Caravan to the prom. I'll look after the Charger for you!")But let's assume the kid is operating his or her own car. Clearly the parents need to be aware that there is no coverage under their own PAP for any liability arising from the kid's use of his car. If he becomes liable for injuries caused by driving his car, and the parents are brought into the suit, they'll only have coverage under the kid's PAP. Remember those lower limits meant to save the big premium bucks? Ah, well. Can't win 'em all.This coverage discussion always leads into the second part of the common answer: the likelihood of the parents being drawn into the claim. The standard response from experts is to discuss the various state laws making parents directly responsible for children up to some specific age–typically 18. Parents also need to be aware that even once a child reaches such age, there are myriad other ways a lawyer can accuse them of liability for the child's actions: ownership of the vehicle, vicarious liability, the child's continuing financial dependency on the parents or any other reason the plaintiff attorney wants to dream up to take a shot at the parents' supposed deeper pockets and better insurance protection.Bottom line, say the insurance experts: This is all just a bad idea, since the parents can never be absolutely sure they've insulated themselves from liability arising from the child's actions, and therefore they need to add the child's car to their policy. Another alternative is to have the child carry the same limits as the parents, but that renders moot the primary motivation for this entire issue, which is saving the big bucks by issuing a separate policy at lower limits.But astute readers may notice one massive gap in all of the above reasoning. Go ahead, look for it. I'll wait.See it?Why is this entire discussion always about the parents? They're saving money. They're trying to protect themselves from liability. Would anyone like to stand up for the kid in this scenario?Example of an actual accident: Kid drives car home from Friday night game; buddies are in car in partying mood; kid's car crosses line into oncoming traffic, strikes another car head on; two kids in other car die, another is severely injured; one passenger in kid's car dies when thrown from car on impact, two others injured (kid also hurt, but injuries minor).Let's assume for a moment that, indeed, the parents cannot be found liable for this accident for any reason. Against the overwhelming odds cited above, the "separate policy for the kid's car" scheme has worked to perfection. My question: If you were the parent of the other kids injured or killed in this accident, how much would you want to sue the driver for? Whatever the amount, can we all agree it would be a sum cosmically far beyond the minimum limits?Now, some may say no one would sue the kid. What does he have? Here we see one of the great fallacies of liability insurance, that it's all about protecting assets. Having few or none, the need for liability coverage is lessened. Isn't that the basis behind the assumption that it's perfectly fine for the kid to have lower limits on the separate policy?Ah, grasshopper. What you've missed is that liability suits aren't just about recovering what the kid may have now. They also can attack what he'll have in the future. For example, here are some scenarios cited in an IIABA Virtual University article by attorney Jim Mahurin:

And what child, even if not heir to substantial assets, plans on having no future earnings? The plaintiffs sue the child, win as large a judgment as possible and then file that judgment as a lien against the child's future earnings. So, to parents who believe the "separate auto at lower limits" scenario is a good idea, I ask: Is that what you really want for your child?Bottom line: The next time you get the "Should a kid's car go on a separate policy?" question, there's a simple answer. NO. Not just because there are policy provisions, not just because there are legal issues over parental liability, but simply because he's your kid and you love him too much to let him risk his future over a burden he isn't ready to carry.Besides, somebody's going to have to pay for your nursing home. Chris Amrhein is an insurance educator and speaker with more than 30 years in the industry. He is also chief fun officer of www.insuranceisfun.com, where his newest book of insurance musings, "Yes, Virginia, There Is Insurance," is now available. Readers may contact Chris at [email protected].