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UPDATED: Mar 13, 2020
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Most parents choose to cover their children under their existing auto insurance policy. In some cases, the young driver will merely be added to the policy as a driver; in other cases, a separate policy might be taken out to cover the teen’s car. Either way, most young people don’t begin paying for their own auto insurance until they’ve left home, and some people stay on the family policy through college and beyond.
There is no specific age limit set by car insurance companies as to when a person needs their own policy. Instead, insurance companies limit their policies to households. All people living within a home who have access to a vehicle and are related to the policyholder through blood or marriage can be covered by a single insurance policy.
Companies do it this way because insurance follows vehicles rather than drivers. The car is generally insured regardless of whoever drives it unless some exclusion written in the policy mandates otherwise. In order to insure a vehicle, the policyholder should have a financial interest in that car; all other members of the household can be listed as drivers.
As a general rule, adding a teenager to an existing auto policy is cheaper than taking out a separate auto policy for that driver. Because teens are some of the most expensive drivers to insure, saving money by bundling the policies is a smart idea. Once a driver moves out on their own, however, he or she must obtain a separate insurance policy.
When Should a Young Driver Be Listed on a Policy?
Once teens obtain drivers licenses, it’s a good idea to list them on the family auto insurance policy even if they do not drive the family car. Insurance companies will assume that everyone of driving age within a household has access to the insured vehicles and may drive them at any time.
They will set rates accordingly, taking the risk factors of everyone in a household into account when determining the cost of premiums. A teen may increase the cost of a parent’s insurance simply by living in the same home, whether or not they actually drive the family vehicle, so there’s no reason not to add that driver to the insurance policy. Even when a driver turns 18, there are many reasons to continue insuring them on the family policy:
— If the young person drives a vehicle owned or co-owned by a parent
— If the young driver still lives at home as a permanent resident
— If the young driver is a college student who is considered a dependent
— If the young person has frequent access to family vehicle
Essentially, any time an individual still lives at home with their parents, is financially dependent upon them or co-owns the vehicle that’s insured, the auto policy should be listed in the parent’s name with the child as a co-insured or listed driver. As long as an individual can be considered a resident relative by the insurance company, there is no reason they cannot be listed on the policy.
Even if a teenager or college student doesn’t drive, adding them to the auto policy is a good idea because it will extend additional coverages to them. For example, all resident relatives listed on an insurance policy will be covered under that policy’s personal injury protection coverage. This covers medical expenses incurred during car accidents, even if the teen is riding in someone else’s car. It also covers injuries when a person is hit as a pedestrian. Many parents find that keeping a college-age child on the family insurance policy is worthwhile just for this coverage. Once the child graduates, he or she can obtain an individual policy with the same coverages.
When Should Drivers Get Their Own Policies?
Insurance policies are meant to cover members of a household. If an individual no longer lives with their parents, no matter what their age, it’s time to get a separate auto policy. Here are some other determining factors:
— The individual is married or has children of their own
— The young driver is the sole owner listed on the vehicle’s title
— The individual lives permanently away from home
— The young person is financially independent
Essentially, any time a person moves out of the house and begins their own household and family, they can no longer be insured under their parent’s auto policy. This is also true if the individual is the sole owner of a vehicle and thus carries financial liability for it.
In cases where grown children are forced by circumstance to move back home with their parents, they can choose to maintain separate policies or they can be covered by the household auto insurance. Bear in mind, however, that the parents cannot insure vehicles that they do not own, so any cars owned by the grown children would need to have the parent added to the title before a policy could be taken out on it.
What Happens if I Never Get Off My Parent’s Policy?
Although adult children are supposed to carry their own auto insurance policies, sometimes people continue to use their parent’s insurance long after they move away from home. It may take the insurance company a long time to realize that this is happening, and in some cases it may not become evident unless a collision occurs.
Once the insurance company does learn about it, however, they will usually respond by completing an underwriting review. If their investigation shows that the policyholder is definitely insuring vehicles that should not be covered under a family auto policy, the insurance company may deny coverage to that vehicle or cancel the policy altogether.
Because of the risks involved, it’s a good idea to never attempt to insure family members who do not live with you. If your grown children are unable to pay for their own insurance, you are better off providing them with financial assistance in another way rather than practicing any dishonesty with the insurance company.