The Perks of Staying on Your Parents’ Car Insurance Policy
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UPDATED: Dec 28, 2020
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- If you’re under the age of 25, staying on your parents’ car insurance policy will be more affordable than buying a policy on your own.
- You can stay on your parents’ car insurance policy no matter how old you are; there is no age limit.
- When you are financially independent, move away from home permanently, own your own vehicle, and get married, you should consider purchasing your own car insurance policy.
Getting your driver’s license is a teenager’s first taste of independence. It may seem like the natural next step to purchase your own independent car insurance policy. But until you turn 25, your rates might be unattainably high. Don’t panic just yet, it’s time for you to learn about the perks of staying on your parents’ car insurance policy.
It’s much wiser to stay on car insurance under parents for as long as possible. For younger drivers, the average cost of car insurance is $691 per month or $8,293 per year. By comparison, the average American driver spends only $84 per month or $1,009 annually.
Do you have to be on your parents’ car insurance? No, but you’ll save money by staying on your parents’ car insurance and arranging to pay them for the additional costs associated with adding you as a named driver.
Read through our complete guide to learn why age impacts your rates, how long you should stay on your parents’ policy, and even the factors that affect the price of car insurance for young drivers.
Whether you’re the child hoping to stay on your parents’ insurance, or if you’re the parent choosing to keep your child on your family policy, make sure you’re not missing out on your best car insurance rates by entering your ZIP code into our free online tool above.
Why should I stay on my parents’ car insurance policy?
Car insurance is legally required in 49 states. The minimum limits for car insurance change by state, but the laws apply to all drivers. When calculating your rate, car insurance underwriters will consider your age, driving record, the state you live in, and the level of coverage you require, among other things.
As a new, young driver, you have two options for purchasing car insurance; you can buy your own policy, or stay on your parents’ policy as a named driver. However, all policies are not created equal, and if you’re not careful, you could end up paying way too much for car insurance.
For one thing, you might wonder if it is cheaper to get your own car insurance, but the truth is, it’s most likely not. Unless you are over the age of 25 and have a perfect driving record, it will be cheaper for you to just stay on your parents’ policy.
Your car insurance rate is based entirely on risk. To insurance providers, age specifically is an indicator of risk because it goes hand in hand with driving experience. The younger you are, the less experience you have on the road, which means you’re more likely to get into an accident and cost the company money in claims. This is one reason the insurance on your parents’ car will be much cheaper.
To mitigate the risk, insurance providers increase the rates for young drivers buying a policy on their own. To younger drivers, this might feel unfair. Unfortunately, annual fatal crash statistics and data back up the assumptions of the insurance companies.
According to the Insurance Institute for Highway Safety, teens aged 16 to 19 account for the lowest number of drivers on the roads, but are involved in the highest ratio of fatal car accidents compared to all other age groups. Therefore, younger drivers are charged much higher than average car insurance rates.
See for yourself the difference between what the average 17-year-old pays for car insurance annually compared to other age groups in the table below.
|Company||17-Year-Old Female||17-Year-Old Male||25-Year-Old Female||25-Year-Old Male||35-Year-Old Female||35-Year-Old Male||60-Year-Old Female||60-Year-Old Male|
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As you can see from the data, teens pay an average of $691 per month on car insurance or $8,293 annually. Depending on what state you live in, your gender can also impact your rates. If you are a male driver under the age of 25, you’ll pay more than female drivers of the same age.
Fortunately, once you turn 25 your rates will decrease dramatically. It will be much easier on your budget to wait and apply for your own policy at that time.
In addition to saving money, getting car insurance under your parents will also help you establish an insurance history. If you maintain this coverage history with the same car insurance company, which means you never let your policy lapse or end up temporarily uninsured, you can receive discounted rates later on.
Your parents can add you to their policy as a named driver. You will be fully protected by the limits of their policy. Their rate will increase after they add you, however, the increase will be closer to $1,000 annually as opposed to $8,000.
Make an arrangement with your parents’ to pay for the difference in cost each month. This will help you establish financial responsibility while also keeping your car insurance rates as low as possible.
Can you drive your parents’ car without insurance? No, this is not advised. If you were to get into an accident, your parents’ insurance provider could refuse to cover the damages which could put your family into financial ruin.
How long can you stay on your parents’ car insurance policy in this way? The good news is, there is no age limit. However, in the next sections, we’ll cover a few specific scenarios where you should finally purchase your own independent policy. Keep reading.
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How long can I stay on my parents’ car insurance policy?
Unlike being on your parent’s health insurance policies, car insurance doesn’t end at 26 years old. There is no age limit that can cause your removal. You can pretty much stay on your parents’ car insurance policy indefinitely. Eventually, you will develop enough independence and it will make sense for you to purchase your own policy.
In this context, dependence and independence are not defined in the same way the IRS uses for tax purposes; you can be considered financially independent for tax reasons but still stay on your parents’ car insurance policy.
Ideally, you’ll reach a point where the rates you receive independently are no longer higher than what it costs to remain on your parents’ policy. In fact, depending on your phase of life, you may be in a situation where your rates are actually lower when you’re on your own.
Keep in mind that this process isn’t a black-and-white circumstance, and looks different for every family. It usually involves factors like financial independence, having your own apartment or house, owning your own car, and getting married. Read on to go into more detail.
Can I stay on my parents’ car insurance policy if I move out?
In some cases, you can stay on your parents’ car insurance policy even if you move away from home, however, this is sort of a gray area.
For example, if you are a college student living on campus and being supported by your parents, you can still be kept on their insurance policy without being contested.
Similarly, if you’re living in a property or rental that belongs to your parents, your coverage will not be contested.
The situation gets a little tricky once you establish independence from your parents. If you are no longer living in the same home and start supporting yourself, your insurance company may want to revisit your individual situation and may decide that you have what is called care, custody, and control of the vehicle.
If this happens, you should purchase your own independent car insurance policy and be taken off of your parents.
Can I stay on my parents’ car insurance policy if I own my own car?
Depending on what state you live in, you might legally be required to purchase your own car insurance policy if you own your own vehicle. Some states legally require the name on the car title to match the name on the insurance policy.
The insurance company will notice that the name on the title does not match the name on your parents’ car insurance policy. If you live in a state with these laws, this can cause the insurance company to drop you from your parent’s policy. Otherwise, you’ll be allowed to maintain coverage through your parents.
If you are financially stable enough to own your own car and your name is on the title, you might be ready to purchase your own insurance policy. Think about it. Owning the car yourself essentially means that you are fully responsible for the car.
However, if you are under the age of 25, you’ll still save money by waiting to get your own policy.
Can I stay on my parents’ car insurance after marriage?
We’ve established that you can, at times, remain insured by your parents’ policy if you move out, but can you stay on your parents’ car insurance after marriage? Maybe a better question is, should you?
If you get married, you are usually no longer dependent on your parents. Insurance companies, as well as your parents and your new spouse, will expect you to get your own car insurance policy. So, when asking “can I be on my parents’ car insurance if I’m married,” the answer is generally no.
However, if your parents own the car you drive and you still live in their home, you technically can stay on their policy. But you’ll miss out on a lot of opportunities for major savings because oftentimes car insurance is cheaper when you’re married.
Some companies believe that married people are more responsible and cautious, so they offer lower rates or provide discounts. You can also insure both your vehicle and your spouse’s vehicle under the same policy, which makes you eligible for multi-car discounts.
If you own a home or take out renters insurance or even pet insurance, you can bundle all of the policies through the same insurance provider for even more opportunities to lower your rates. Ultimately, getting married is a great time to take out your own car insurance policy.
What can cause you to be removed from a parents’ car insurance policy?
Now that you know you can stay on your parent’s car insurance, you’ll want to avoid a few scenarios that could get you removed from their policy. For example, if you have a poor driving history, it’s best to have your own car insurance.
For one thing, make sure you maintain a clean driving record and practice safe driving techniques, especially if you’re a young driver. According to the Centers for Disease Control and Prevention, car accidents are the leading cause of teen deaths. Therefore, if you prove to be a dangerous teen driver, you’ll either receive incredibly high rates or you’ll lose coverage entirely.
If the insurer does not drop you, at the very least your parents will not appreciate the rate hikes due to your unsafe driving. Take a look at how just one accident, speeding ticket, or DUI can affect your car insurance rates.
|Company||Clean Record||1 Accident||1 DUI||1 Speeding Violation|
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One accident alone can raise your car insurance rates by around $80 a month. Multiple accidents or tickets will cause your rates to skyrocket. Remember, if you’re younger than 25, the consequences are even stricter.
Additionally, DUIs are an expensive mistake. Drinking and driving not only causes insurance companies to place you under a high-risk category, but you may not need to wait for the company to take you off your parent’s policy. Your parents may choose to remove you first.
A clean driving record will save you thousands of dollars a year. If you want to stay on your parent’s policy, make good driving choices, and don’t get a DUI. That way, your insurance company will continue to see you as low risk and your parents won’t mind sharing their policy with you.
You’ll save much more money in the long run if you go that route, instead of pursuing independent insurance coverage.
How can young drivers reduce rates on their parents’ car insurance policy?
Adding a teenager or younger new driver to a car insurance policy will cause the rate to increase by around 130 percent. Let’s discuss how to reduce the cost of car insurance when a child is added to a family policy.
In order to minimize the rate hike, you should compare quotes from multiple companies to make sure your family is not paying too much for their policy, and you should look out for discounts. Common discounts include school and college discounts.
Common discounts young drivers often qualify for include good student discounts and safe driver discounts. Many companies take a small percentage off of your rate if you are a student who maintains at least a B average.
Similarly, if you maintain a clean driving record and take a driver’s education course, you could receive another break in your rates.
This advice is also applicable to young drivers who do not have the option of staying on a parents’ policy. Discounts can really add up and help make your rates more affordable.
There are many pros and cons of staying on your parents’ car insurance policy. Although your insurance may be lower, the policy as a whole can be increased due to a young driver on the policy. You and your parents will need to look at all the factors to decide what option is best.
You now know all of the perks of staying on your parents’ car insurance policy. You’ll save major money by staying on your parents’ policy until you are old enough and financially independent enough to start receiving more competitive, affordable auto insurance quotes on your own.
Ready to buy car insurance? Make sure you and your parents are getting the best possible rate for your car insurance policy by entering your ZIP code into our free online tool below and start comparing affordable car insurance quotes.