Car Insurance

[laawaaris]

Ok, so I have Honda Accord that is legally titled under my name.

My sister got married and so I gave her the car to use in Austin where she lives. I told her and her husband to buy the car so that the title is under their name. My assumption is that this would leave out any problems that could result with filing for a claim with the insurance company.

My sister has NOT bought the car, but she did get an Full Coverage insurance policy under her name for the vehicle.

Are there any potential problems with this? If she gets into a fender bender, she can still file for a claim and the insurance will honor it right?

My only concern is that if the car is totaled and she has to get reimbursed from the Insurance, they will ask for the Title of the vehicle. The title has my name and not hers, so that could be a potential problem.

Anybody have any knowledge of this arrangement?

[epoh]

You can get the title changed over very quickly. Why not just go ahead and sign it over to her? She's your sister, so you can harass her for money later. She's already go the car anyway.

[markfh]

epoh is right. Get your name off the title ASAP. If she gets into an accident, even though she has insurance, with your name on the title someone can still come after you as well.

[laawaaris]

Doesn't she have to technically buy the car? She's not going to give me money for it, but she has to take a "bill of sale" and the signed title to the DMV so that she can get an official title under her name?

Maybe its not the DMV, but you have to go somewhere to pay taxes on the vehicle that you just "bought" or "titled" under your name.

[STP Images]

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[LoungeLizard]

You can change it over as a "sale" for $0.

[laawaaris]

Yeah, but you still have to pay tax on it right? I mean you have to take the paper to the DMV or the courthouse or whatever it is.

They will look in the Kelly Blue Book and charge tax on the value of the car or the sales price - whichever is higher.

That's what I understand. You're saying I simply need to sign the back and that's it? She puts her name on the dotted line and the Title is hers? There is no official, newly issued Title that she gets with ONLY her name on it? She doesn't need to go anywhere to show that she is the owner of the car?

[Roadrnr]

Well, you can gift it to someone and there is a little bit of tax to be paid. but not much.

The thing is, that if the title isn't under her name and she has an accident. You are liable and her policy pays nothing. She is basically wasting her money.

Now, if they are refusing to change the title over to their names, the best thing that you can do in this situation is have your name listed as an additional insured on that vehicle. Because you are the titled owner on the vehicle, you are the only one that has an insurable interest in the car. Her policy will be null and void. But, if the title stays in your name and you are listed on the policy (not as a driver, but as an additional insured) that will protect you under her policy, and keep her policy ok.

I'm surprised that her insurance company didn't do a title check on the vehicle to make sure it was in her name. I know that our agency will run title checks on used vehicles to make sure that it has been transferred to our clients name.

EDIT: Yes, you sign the title over to her, and you have to sign the sales tax affidavit also. That is where you declare what the sales price of the vehicle was or you denote that it was a gift. My truck was given to me and I think it cost me $20 for a gift tax when I switched the title over.

[andyz]

Last September the State changed the laws and requires that it be taxed on the Standard Presumptive Value. This is like 80% of book. So if the car is worth $5,000 and you sell it for $2,000, it is taxed on a value of $4,000. At 6.25% that is $250.

But you do need to get it out of your name.

[laawaaris]

hey matt (and all) thanks ....

i just emailed everything you guys said in a nutshell to my sister

basically i think they are being lazy and don't want to pay extra money if they don't absolutely have to ....

i think you're right though ... the title needs to be in their name right away

[Roadrnr]

really that's the best course of action. Put it this way, the cost of changing the title over and paying whatever tax you will have to pay, is FAR less then the cost of paying for an accident out of your pocket because of an insurable interest issue. The application for insurance that she signed, she affirmed the car was hers, and not just literally. It has to be her car on paper too.

[andyz]

A good friend of mine used to say that "you are always well insured, until you have a claim." Even your insurance could leave you high and dry because you weren't the driver and hadn't told them it was being sold, etc. I think there are lots of reasons they could not pay.

I don't know about the "gift" tax mentioned above. A lot of the tax issues are in Title 34 of the TAC.

[Roadrnr]

Originally Posted by andyz

Last September the State changed the laws and requires that it be taxed on the Standard Presumptive Value. This is like 80% of book. So if the car is worth $5,000 and you sell it for $2,000, it is taxed on a value of $4,000. At 6.25% that is $250.

But you do need to get it out of your name.

True, but if it is a gift, then you just pay a $10 gift tax as stated on this form

[Roadrnr]

Originally Posted by andyz

A good friend of mine used to say that "you are always well insured, until you have a claim." Even your insurance could leave you high and dry because you weren't the driver and hadn't told them it was being sold, etc. I think there are lots of reasons they could not pay.

I don't know about the "gift" tax mentioned above. A lot of the tax issues are in Title 34 of the TAC.

Well, the only reason that the insurance company would not pay on a claim, is because she isn't the registered owner. They aren't out to leave you "high and dry" or just come up with a reason to deny a claim. There are laws in place by the TDI to keep that from happening. If a claim is denied, it's because there wasn't coverage as outlined in the Texas Auto Policy.

As far as being "well insurured, until you have a claim"...you're always well insured if you have the right agent.

[andyz]

The gift tax looks like a good deal. And unfortunately, as a banker, I saw too many losses that were not covered. That is often between the customer and the agent, I agree. But a lot of the folks I worked with on the collection side weren't the best at getting insurance or a relationship with that agent or company.

Thanks for the form link.