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:

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Policy Issues: Low auto limit means trouble down the road

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