The Perks of Staying on Your Parents’ 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 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’ insurance policy.

The average of insurance for teen drivers is $691 per month or $8,293 per year. By comparison, the average rates for American drivers come in around $84 per month or $1,009 annually.

Do you have to be on your parents’ policy? No, but you’ll save money by staying on your parents’ policy and arranging to pay them for the additional costs in insurance premiums associated with adding you as a named driver. As an added bonus, your parents likely have an experienced insurance agent who can help your parents secure and maintain the best rates.

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 insurance for young drivers.

Whether you’re the child hoping to stay on your parents’ policy, 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 insurance rates by entering your ZIP code into our free online tool above.

Why should I stay on my parent’s insurance policy?

insurance is legally required in 49 states. The minimum coverage insurance limits for coverage change by state, but the laws apply to all drivers. When calculating your 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 coverage; 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 one thing, you might wonder if it is cheaper to get your own auto insurance policy, 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 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 the company money in claims. This is one reason the coverage of your parents’ will be much cheaper.

To mitigate the risk, insurance providers increase the rates for young drivers buying a policy independently. To younger drivers, this might feel unfair. Unfortunately, annual fatal crash statistics and data back up the assumptions of the insurers.

According to the Insurance Institute for Highway Safety, teens aged 16-19 account for the lowest number of drivers on the roads but are involved in the highest ratio of fatal 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 annually compared to other rates by age groups in the table below.

Average Annual Full Coverage Car Insurance Rates By Age and Gender

As you can see from the data, teens pay an average of $691 per month on car policies or $8,293 annually. Depending on what state you live in, your gender can also impact your rates. One example of gender discrimination here is that you’ll pay more than female drivers of the same age if you are a male driver under the age of 25. (For more information, read our “How to Find a Safe, Budget-Friendly Car for your Teen“).

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 coverage under your parents will also help you establish history. If you maintain this coverage history with the same car insurer, 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. The limits of their policy will fully protect you. Their rate will increase after they add you, but the increase will be closer to $1,000 annually instead of $8,000. You may be able to help lower your parents’ annual premiums with a student discount. Suggest your parents ask their insurer about other insurance discounts as well, as this is a great way to lower the costs of having inexperienced drivers on an auto policy. (For more information, read our “How to Reduce the Cost of Car Insurance“).

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 rates as low as possible.

If you were to get into an accident, your parents’ insurance provider could refuse to cover the damages, putting your family into financial ruin. This is why it’s important to practice safe driving habits.

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 separate policy. Keep reading.

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How Car Insurance Changes for Drivers Under 25

Understanding Car Insurance for Under 25 Year Olds

Car insurance for under 25 year olds is often significantly more expensive compared to older drivers. This is because younger drivers are considered higher risk due to their lack of driving experience. Insurance companies typically charge higher premiums to mitigate the potential costs associated with claims from this age group.

Why Car Insurance is Expensive for Drivers Under 25

• Lack of Experience: Younger drivers have less experience on the road, increasing the likelihood of accidents.
• Higher Accident Rates: Statistics show that drivers under 25 are involved in more accidents compared to older drivers.
• Risk-Taking Behavior: Younger drivers are more likely to engage in risky driving behaviors, such as speeding or using their phones while driving.

Cheaper Car Insurance When You Turn 25

A significant change occurs in insurance premiums once a driver turns 25. Many insurers reduce the rates considerably, reflecting the decreased risk.

Understanding the Drop in Car Insurance Premiums at Age 25

Understanding how much your insurance goes down when you turn 25 can help in financial planning. While the exact amount varies, many drivers see a noticeable reduction in their insurance costs.

Drive Any Car Insurance Under 25

• Policy Options: Some insurers offer “drive any car” policies for drivers under 25, allowing them to drive multiple vehicles without needing separate insurance for each one.
• Restrictions: These policies may come with higher premiums and specific restrictions due to the higher risk associated with younger drivers.

Road Risk Insurance Under 25

• What It Covers: Road risk insurance under 25 is designed for those who drive vehicles on public roads as part of their job or business.
• Eligibility: This type of insurance can be harder to obtain and more expensive for drivers under 25 due to the increased risk.

Steps to Get Cheaper Car Insurance Under 25

1. Compare Quotes: Shop around and compare quotes from different insurers to find the best deal.
2. Good Student Discounts: Maintain good grades to qualify for student discounts.
3. Defensive Driving Courses: Complete a defensive driving course to lower your premiums.
4. Add to Parent’s Policy: Staying on your parents’ insurance policy can be cheaper than getting your own.
5. Choose a Safe Car: Opt for a car with good safety ratings and lower insurance costs.

Understanding the dynamics of car insurance for under 25 year olds and how much your insurance goes down when you turn 25 can help young drivers make informed decisions and potentially save on their premiums.

Evaluating the Cost Benefits of Being on Parents’ Car Insurance

When considering whether it is cheaper to be on parents’ car insurance, the answer often depends on several factors, including the parent’s driving record, the number of cars insured, and the insurance provider. Generally, young drivers may find lower premiums by staying on their parents’ policy rather than obtaining their own.

Benefits of Being on Parents’ Car Insurance

• Lower Premiums: Parents’ insurance policies often have lower premiums compared to individual policies for young drivers.
• Access to Discounts: Parents may qualify for multi-policy discounts or loyalty discounts that can further reduce premiums.
• Easier Management: It’s simpler to manage insurance matters under a single household policy.

Best Car Insurance Companies for Teens and 25 Year-Olds

Finding the best car insurance for 25-year-olds and teens involves comparing policies that offer competitive rates, discounts for safe driving and good grades, and comprehensive coverage options. Some of the best car insurance for 25-year-olds and teens known for providing suitable coverage include Allstate, Geico, State Farm, and Progressive.

Putting Car Insurance Under Parents’ Name

Putting car insurance under parents’ name ensures that the policyholder (usually the parent) takes primary responsibility for the policy. This arrangement can lead to lower premiums and easier management, especially for young drivers who benefit from their parents’ established insurance history and driving record.

How long can I stay on my parents’ car insurance policy?

Unlike being on your parent’s health policies, your vehicle’s coverage doesn’t end at 26 years old. No age limit can cause your removal. You can pretty much stay on your parents’ 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’ auto insurance policies.

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.

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Can I stay on my parents’ car insurance policy if I move out?

In some cases, you can stay on your parents’ vehicle 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 vehicle’s 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’ policy 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. Married couples do pay less for auto insurance so you may still get a decent deal when you purchase your own auto policy.

However, if your parents own the car you drive and you still live in their home, you can technically stay on their policy. But you’ll miss out on many opportunities for major savings because oftentimes, car insurance is cheaper when you’re married.

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.

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.

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Car Insurance for Married Individuals

• Getting married typically requires you to get your own car insurance policy. While you might wonder, “Can I stay on my parents’ car insurance if I get married?” the answer depends on the insurance company’s policies. Most insurers require married individuals to have separate policies from their parents.
• Similar to the previous question, you might ask, “Can you stay on your parents’ car insurance if you get married?” Generally, married individuals need to obtain their own car insurance policy. However, discussing your situation with your insurance provider can give you specific guidance.
• Marriage can have a positive impact on car insurance premiums. Many insurers offer a car insurance marriage discount, as married couples are often considered lower risk. Therefore, is car insurance cheaper when married? Yes, many find that their rates decrease after getting married due to this discount.

Can I insure a car I don’t own?

It is possible to insure a car you don’t own, but it is rare to do so. Generally, the owner of the car will be the person insuring it. A car insurance company wants to ensure that the primary policyholder has “insurable interest” in the car they are trying to insure. From the companies point of view, if you do not own the car and do not regularly drive it, you do not have an insurable interest.

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 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.

Average Annual Car Insurance Rates by Driving History

 

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.

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How can young drivers rates on their parents’ insurance policy?

Adding a teenager or younger new driver to a insurance policy will cause the rate to increase by around 130 percent. Let’s discuss how to the of insurance when a child is added to a family policy.

To minimize the rate hike, and to ensure some long-term tax relief, you should compare quotes from multiple companies to make sure you find the cheapest options, 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 driving 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. Auto insurance companies know that if you’re a safer driver, you’re less likely to file a claim.

You can also choose only to get liability coverage, which typically includes bodily injury liability and property damage liability. That means you won’t have comprehensive coverage, collision coverage, personal injury protection (PIP), or Medical payments coverage (MedPay). But, the average for teen drivers is much cheaper if their vehicle is eligible.

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‘ 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’ 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 insurance? Make sure you and your parents are getting the best possible rate for your  insurance policy by entering your ZIP code into our free online tool below and start comparing affordable insurance quotes.