How Long Can You Stay On Your Parents Car Insurance?

For many teenagers, the cost of buying car insurance on their own may be more than their summer jobs can handle. That’s why many parents put teenagers on the family insurance policy, where the expense is much less than if a teenager bought his or her own insurance policy.

Car insurance is a major expense for which many young people fail to plan. In fact, it's especially important that you account for the cost of your auto insurance policy in your household's budget. Since these costs tend to vary over long periods of time, a sudden spike in your auto insurance premiums after an accident could wreak havoc on the careful financial planning that you've conducted over the years. In order to avoid such an embarrassing problem, you'll need to take steps to keep your car insurance premiums as low as possible.

You'll almost certainly be allowed to stay on your parents' insurance policy for as long as you remain single and live in your parents' house. If you enter into a marriage, your insurer might bring an end to this arrangement. While most insurance companies permit individuals who don't live with their parents to remain attached to their insurance policies, it's possible that your provider will require you to obtain your own policy after your final move-out.

At some point, however, teenagers become adults and their insurance risk level declines. Consequently, their insurance premium, were they to buy their own policy, also reduces as they move from adolescence to adulthood. Is this the time to advise children to take over responsibility and move off their parents’ car insurance policy?

How long can kids stay on their parents’ car insurance?

There’s no specific cutoff age for children to remain on their parents’ car insurance. If the child is considered a dependent, they can stay on a household insurance policy indefinitely. However, each insurance company interprets “dependent” in slightly different ways. In general, the child needs to live at home either part-time or full-time and drive a car owned by a parent. This means that a college student who comes home for breaks can stay on the policy, and so can any child living at home. The main factor in determining if a child can be on an insurance policy comes down to who owns the title of the vehicle they’re driving. If the child owns the title of a vehicle outright, then most insurance companies want that vehicle insured independently of a family or household policy.

If a child owns a car outright, can they stay on their parents’ car insurance?

No. Many companies require a child to pick up their own insurance policy for cars they own outright, especially if a parent isn’t listed as an owner on the title. But if your child still lives at home, some insurers could consider your kid’s car a household vehicle, thereby allowing it to be covered under a larger umbrella policy. Confirm with your insurer how it handles this specific situation.

Do kids need insurance to drive their parents’ car?

Yes. Unlike with occasional drivers, members of a household who intend to drive the family car must be insured under a single household policy. No matter the age of the child, they’d need to be listed as a driver of the vehicle to legally get behind its wheel.

Can a child stay on their parents’ car insurance after they marry?

No. Most car insurance companies consider marriage a clear break from any parents. This kind of financial independence will likely require your child to have their own insurance policy, especially if a move out of the family home comes with the marriage.

If your child still lives at home, you might find exceptions. If they’re still a member of the household and frequently drive a vehicle owned by a parent, they might still need to be listed as a driver on your household policy. This doesn’t mean they won’t also have to purchase their own policy, so confirm with your insurer how it handles this situation.

When do insurance rates go down for young drivers?

Insurance rates tend to go down around age 25. Statistically, drivers from 25 to 65 are much less likely to get in an accident than drivers outside of this age range. Drivers under 21 and senior drivers tend to see higher premiums.

The specific age that your child’s insurance policy decreases varies by provider though. So be sure to confirm with your provider when you might see your child’s rates go down.

Risk factors

A youthful driver - even one in his or her early 20s - is a riskier driver. “When you remove a youthful driver from the family policy, you reduce the probability of a claim for property damage, first-party and third-party injuries, and other liabilities that may result from the accident,” Hartwig explains. “Once the youthful driver is taken off the insurance, the premium for the family policy will decline considerably, as will the premium for the parent’s excess liability or umbrella policy offering added protections on top of the car insurance.”

So there are sound financial reasons for removing your kids from the family’s automobile insurance policy. Knowing the right age to do it is the challenge.

Reconsider at graduation

Many parents generally opt to retain teens on the family’s automobile insurance policy until they graduate from college, assuming they find employment and live away from home. At this point they should be paying for their own housing, food and credit card bills, building up a positive credit rating. Automobile insurers consider an applicant’s credit score among several other factors in their underwriting. Assuming a clean driving record and a solid credit history, there’s a good chance of a competitive premium. “By developing a better credit score, most everyone can secure auto insurance at a lower cost,” Hartwig says.

Some parents may decide to continue keeping their children on the policy for a period after their graduation. But if the child can afford paying for his or her own auto insurance, this is the time for the family to sit down and talk about it.

Different rates for girls and boys

Teens on a family’s car insurance policy will be rated higher and differently, based on their gender, than older adults. “If two parents have boy-and-girl fraternal twins, each getting their driver’s license at the same time, the girl will initially receive a better rate than the boy, based on statistical data indicating a lower risk of accidents involving teenage girls,” says Kevin Lynch, assistant professor of insurance at The American College of Financial Services in Bryn Mawr, Pennsylvania.

Here’s why: According to the Insurance Institute for Highway Safety, 9.2 teenage male drivers die in automobile accidents for every 100 million vehicle miles, nearly double the death rate of 5.3 for female teenagers. This explains why insuring a teenage son typically costs 25% more than insuring a teenage daughter.

Over time, as both genders build their driving records, other insurance underwriting factors come into play. “When the daughter turns 21, assuming she has a clean driving record, she will be treated for rate purposes as an adult and given standard adult rates,” Lynch says. However, boys may not have standard adult rates until they reach age 25 if they have a clean driving record. Regardless of gender, teaching your teens safe driving is of the utmost importance, both for insurance rates and their safety. Here are some teen driving safety tips to help you get started.

There are other nuances to consider. According to Lynch, a child living at home or going away to college or graduate school will be allowed to remain on their parents auto policy with no additional fees until age 24, unless he or she has purchased a separate insurance policy.

Clarifying the decision

So when should a parent suggest to a son or daughter that the time has come for them to consider purchasing their own insurance policy? Obviously, this decision depends on many factors, including the child’s driving record, maturity and financial situation, in addition to the parents’ plans for their financial future.

In some cases, such as when a young driver moves to a state that has lower insurance premiums, this decision becomes easier. “My son moved to Texas after college, where car insurance is a lot cheaper than it is in New York,” says Hartwig. “He had a job and could afford his own insurance now.”

Reasons to Remain on Your Parent's Policy

Most of the time, young drivers can get lower insurance rates as long as they remain on their parents’ car insurance policy—as they have a good driving record, don't get any speeding tickets, and are not involved in accidents.

Additionally, students can also help decrease the amount of their parents’ policy premiums by getting good grades and passing a driver's education course. Most insurance companies offer discounts for young drivers who do well in school and enroll in a driver-safety course. In fact, these types of discounts may save your parents 20 to 25 percent off the premium for adding you to their policy.

Premium Considerations for Young Drivers

Although there are many factors that will go into determining how much the insurance company will charge your parents for adding you to their policy, the most important factors will be your driving record and the type of vehicle that you drive. The insurance company will also look at how often you will be driving and the distances that you will normally travel. For example, if you work or go to school relatively close your home, then the insurance company may charge lower premiums than if you have to commute one or two hours daily to work or school.

Furthermore, if you are driving a particularly expensive vehicle or a sports car, then the insurance company is more likely to charge higher premiums than if you were driving an economy car. In order to help your parents save money on car insurance premiums, you should consider driving a vehicle that costs a little less and does not cost so much to insure. After your 25th birthday, your insurance premiums typically go down considerably and you can opt to go with a more expensive, trendier vehicle at that time.

WHY DO I NEED CAR INSURANCE?

Car insurance protects you if anything happens to you, your car, someone else or someone else’s car in the event of an accident. There are many different policies you can choose from, depending on what sort of coverage you want.

Liability Coverage pays claims if you are responsible for hurting another person or for damaging another person’s property.

Uninsured Motorists Coverage comes in two parts which must be purchased separately. If you are hit by someone who does not have insurance, Bodily Injury Coverage pays for your injuries, while Property Damage Coverage pays for damage done to your car.

Collision Coverage pays if your own car is damaged in a collision.

Comprehensive Coverage pays for damage to your car, such as theft, vandalism, glass breakage, etc.

Medical Expense Coverage pays medical expenses for you and your passengers.

WHAT IF I DON’T HAVE INSURANCE?

Auto insurance is required by law in Louisiana. If an officer stops you and you don’t have insurance, he can tow or impound your car. Not having insurance can also get you in trouble if you are in an accident, even if you are not at fault. According to Louisiana law, the other driver is not required to pay you the first $15,000 of damages resulting in bodily injury or the first $25,000 of property damages if you do not have insurance.

Question: My son is graduating from high school and will soon turn 18. He is living at home and won't be attending college.  Is there a certain age at which she must come off my car insurance policy?

Answer: There is no certain age at which a child must be taken off your car insurance policy, as long as he or she is living at home. Unlike other types of insurance policies, such as health insurance that allows a child to stay on until they turn 26, there is not a cutoff age for auto insurance.

If your adult child has a driver's license and is living in your home, then normally your car insurance company will actually mandate that she is listed on your policy -- whether she is 18, 26 or 46.

People living in your household have access to the insured vehicles, so insurance providers want all licensed household members placed on your car insurance policy. This allows your auto insurance company to look at all drivers' risk factors and calculate your car insurance rates accurately.

If your children obtains and titles a vehicle in her own name while living at home, then she may need to obtain her own policy on it, separate from yours since you won't have an insurance interest in her vehicle to place it on your policy, something most auto insurance companies require.

Having her own policy would usually be more expensive than her remaining on yours, so while she stays at home she can save money by continuing to drive your cars and be on your auto insurance policy.

If, though, your kid gets her own vehicle and car insurance policy, you can see about taking her off of your policy to lower your car insurance premium. With some insurance companies, you'd have to exclude her from your policy to take her off of it while she remains living in your home.

Excluding a driver from your policy means that your car insurance coverages won't extend to them if they operate your vehicle. So, if your kid was excluded but drove your car and crashed you both could be held personally responsible for the damages she caused.

If you are receiving a good student discount for your daughter, that will end soon because she is no longer attending school. This may make it the right time to shop around and make sure you are getting the cheapest car insurance rates possible.

Insurance companies have different rating systems and discounts, so by shopping around you may be able to save money, even while continuing to insure your young driver on your policy. 

References:

[1] Guide to Teen Auto Insurance - Louisiana Department of Insurance https://www.ldi.la.gov/docs/default-source/documents/publicaffairs/consumerpublications/guide_to_teen_auto_insurance-web.pdf?sfvrsn=c1907c52_21

[2] How Long Can I Use My Parent's Car Insurance Policy https://www.carsdirect.com/car-insurance/how-long-can-i-use-my-parents-car-insurance-policy

[3] Young Adult Coverage | HHS.gov https://www.hhs.gov/healthcare/about-the-aca/young-adult-coverage/index.html

[4] How long can a kid stay on their parents’ car insurance? https://www.finder.com/how-long-can-a-kid-stay-on-their-parents-car-insurance

[5] Can I stay on my parents’ car insurance if I move out? https://cover.com/blog/can-i-stay-on-my-parents-car-insurance-if-i-move-out/

[6] When should children be taken off their parents’ car insurance policy https://www.nationwide.com/parents-car-insurance.jsp

[7] How Long Can I Stay on My Parents’ Insurance? https://thelawdictionary.org/article/how-long-can-i-stay-on-my-parents-insurance/

[8] How long can kids stay on parent's car insurance policy? https://www.nasdaq.com/article/how-long-can-kids-stay-on-parents-car-insurance-policy-cm144176