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UPDATED: Mar 13, 2020
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Car insurance provides a unique difficulty for many young drivers. In some cases, auto insurance is the first bill a teenager or young adult takes on for himself. While many young drivers are equal to the task of paying their own insurance, they may be uncomfortable putting the policy under their own names. When should a person get his own insurance policy? Can a driver keep his insurance in his parent’s name? When purchasing your own auto policy, it’s important to understand how it works; by preparing in advance, you can make the process as simple and painless as possible.
Car Insurance for Young Drivers
Drivers under 25 pay higher rates for car insurance than nearly any other demographic. Because young drivers don’t have as much driving experience to base rates on, insurance companies must rely on statistical information to determine how much risk a young driver will pose. Because teenagers and young adults are notoriously likely to be involved in accidents, they pay high rates regardless of their own specific driving history.
In order to offset the cost somewhat, a young driver may choose to maintain his car insurance on a parent’s policy. While being included as a driver on the parent’s insurance will cause the parent’s rates to rise, the rate increase may still cost less than the cost of an individual policy for the young adult’s vehicle.
Should I buy my own car insurance policy or be added to my parent’s?
If your parent’s home is your primary residence, you can be added to their policy as a permissive use driver. This means that your claims will be covered regardless of what vehicle you drive on their policy. It also means that first-party medical coverage will extend to you if you are ever involved in a car accident, whether or not that accident involves a car you own.
If you live primarily away from home and drive your own vehicle predominately, you may not need to be added to your parent’s policy. Having a policy in your name may be more expensive in the beginning, but after several years your rates will reduce dramatically thanks to your longstanding patronage with the company. You will be eligible for better discounts if you have owned a policy for a long time.
In order to include your vehicle on the insurance policy, your parents will need to be listed as owners on the vehicle’s registration. If you are the sole owner listed on the title, you should be the primary policyholder. While some insurance agencies will allow you to insure a vehicle that’s not in your name, the practice is frowned upon by most companies.
Having a vehicle insured in a different name than the vehicle’s owner presents a conflict of interests to the insurance company. If that car is damaged in an accident, the insurance company must make the check out to the vehicle’s owner; if the policyholder is not the owner, the company will not be able to issue payment.
Should I add my parents to my policy?
If you do choose to purchase your own auto policy, you should be sure to add at least one other person to your policy as a driver. Until you start your own family, this additional person will usually be your mother or father. The reason for adding an additional driver to your policy is so that someone is able to handle your policy affairs other than you in the event of an emergency.
For example, if you leave the country to study abroad or serve in the military, you will probably leave your vehicle behind. If that vehicle sustains damage while it’s parked, you would be unable to handle the claim yourself. If no one else is listed on your policy, you will need to wait until you come home in order to repair the damage to your car.
If someone is listed on your policy, however, they can call and file the claim on your behalf and have the vehicle repaired for you. Not only is this more convenient, it’s sometimes necessary. Having the ability for a family member to file a claim on your policy and seek repairs is especially helpful if you are ever injured in a car accident and are unable to handle the claim yourself.
Whether you choose to stay on your parent’s policy or seek your own policy, it’s important to understand exactly how your coverage works and what your insurance is paying for. If you have any questions about your policy, be sure to ask your insurance agent; he will be happy to discuss your policy with you and make any necessary changes.