Does Your Car Insurer Need to Know All Your Kids? Michigan Cases Raise Question
Who you list on your policy matters more than most drivers realize, especially when it comes to who lives in your home.
Having car insurance is supposed to protect you after a crash, helping cover repairs and medical costs when something goes wrong.
But some recent cases in Michigan in which people were reportedly denied claims because they didn't list their children with their insurance providers are raising questions about little-known household disclosure rules that can affect whether coverage applies at all.
In some states, insurers require policyholders to list not just drivers, but everyone who lives in the household, including children. If that information is missing, even unintentionally, a routine accident can turn into a costly financial nightmare. Here’s what drivers should know about how these disclosure rules work and why they matter.
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What happened in Michigan
WDIV, the local NBC affiliate in Detroit, has been reporting on cases in which people say they were denied coverage after an incident because they failed to document their children with the provider.
Insurers in Michigan often require applicants to disclose all household residents, including non-drivers, when underwriting personal injury protection (PIP) coverage. Under Michigan's no-fault law, PIP benefits attach to the named insured and household relatives, and failing to list them can affect eligibility for coverage.
The reported cases include an Oakland County driver who submitted a claim after getting in a crash while her 12-year-old daughter and her daughter's friend were in the car. The driver submitted a claim that included a police report showing children were in the vehicle at the time of the crash.
Weeks later, WDIV reported, she received a letter stating the claim would not be paid and that her policy was being canceled retroactive to her last renewal date because a nondriving child who lived in her home wasn't listed on her policy's PIP form.
How Michigan's no-fault and PIP system works
Michigan is one of a handful of states with a no-fault auto insurance system, which means each driver's own insurance pays for certain costs after a crash, regardless of who caused the accident.
Under Michigan's no-fault law (PDF), all drivers are required to carry PIP as part of their auto insurance. PIP is designed to cover medical bills, lost wages and other accident-related costs for the insured and eligible household members, no matter who was at fault.
State statute defines PIP benefits broadly: Coverage applies to the named insured, their spouse and relatives domiciled in the same household who suffer accidental bodily injury in a motor-vehicle crash. Because of this definition, insurers use household resident information to determine who is eligible for benefits under a policy.
Why insurers require all household members to be listed
When it comes to PIP coverage, car insurance companies assess risk based on who lives in the household, not just who is licensed to drive. For example, a household with multiple drivers has a greater risk of getting into a car accident than a household with just one driver.
Additionally, because PIP benefits extend to household relatives, insurers might face higher potential medical payouts in households with more dependents, including children, even if those children never drive.
As a result, insurers can require customers to disclose all household residents, and that information might be collected through applications, renewal forms or periodic verification requests. As these recent denials show, failing to provide complete household information can have serious financial consequences.
Why many drivers don't realize who must be listed on their policy
Part of the problem is that many drivers are unclear about who needs to be listed on an auto insurance policy. Some assume only licensed drivers must be disclosed, while others might not realize that children, roommates or adult children who move back home can also count as household residents under insurance rules.
There's also a lot of confusion around the difference between a temporary visitor and a household resident. Most policies allow permissive use, meaning liability and collision coverage might extend to someone who occasionally borrows your car, such as a friend visiting for a weekend.
But if that visitor establishes a long-term presence, they'll be considered a resident, and you'll need to update your insurance information to reflect that. State laws differ on the number of days that determine when a visitor becomes a resident, so it's a good idea to contact your insurance company with any questions.
Is this only happening in Michigan?
Michigan's no-fault system makes disclosing dependents particularly important, but similar household disclosure clauses exist in many states. Even where no-fault laws don't apply, insurers nationwide often require customers to list all their household residents, not just licensed drivers, though enforcement and penalties can vary.
Twelve states and Puerto Rico require mandatory no-fault insurance with PIP benefits, including Florida, Hawaii, Kansas, Massachusetts, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah, in addition to Michigan. The structure and specific requirements of PIP vary by state, however, and not all no-fault systems are identical.
Drivers everywhere should review their own policy language. Check your declarations page and any forms you've signed, and contact your insurer to correct any missing or outdated household information.
What this means for policyholders
It's important to be detail-oriented and accurate when completing any paperwork for your insurance provider. This is a good time to:
- Review your declarations page and application disclosures. Carefully re-read the instructions and make sure you've shared all relevant and required information with your insurer.
- Confirm who must be listed as a household member. If you assumed that you only needed to list drivers, double-check and contact your insurance company to make sure this is accurate.
- Notify insurers of changes in household composition. If you have a baby, get married or if an adult child moves back home again, promptly notify your insurance company so they can update your policy.
Rather than assuming your coverage rules, it's best to contact your agent or insurer directly, especially if you're dealing with a complicated situation or unusual household composition.
What to do if a claim is denied over household disclosures
If your insurer denies a claim over household disclosures, start with the following steps:
- Request a written explanation: Ask for an explanation in writing, and request your insurer cite specific policy language that explains the reason for the denial.
- Ask to correct or reinstate your coverage: In some situations, your insurer might be willing to help you correct or reinstate your coverage. Now is the time to ask for details about what changes you need to make to correct the issue.
- Consult a professional: Contact an insurance attorney or state insurance regulator for additional help. These professionals might be able to help you find a solution.
Don't delay these steps. It's important to act quickly after receiving a denial, especially if medical bills or vehicle damage are involved. These situations highlight how small details in insurance paperwork can carry major financial consequences.
For families, especially those with children or changing household arrangements, knowing exactly who must be listed on an auto policy could make the difference between a paid claim and a costly legal fight.
Need a car insurance quote? Use the tool below to explore some of today's top car insurance offers, powered by Bankrate:
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