Insuring Kids on Your Auto Policy

When your kids get old enough to drive, it can be an anxiety-inducing event for a parent.  You worry, of course, but it also significantly affects your auto insurance, which can dig a hole in your wallet.  You wonder: Do I have to list them as a driver?  Should they get their own policy?  Will I need to sell a kidney to pay the premium?  I once had three teen drivers in my house, so I feel your pain.

There are several ways to handle kids becoming drivers, but answers to even the toughest questions are pretty straightforward.  First, let’s get this out of the way:  Yes, it’s expensive to insure teen drivers.  I tell clients it’s not IF they’ll have an accident, but WHEN they’ll have one and how serious it will be.  As a parent, you hope they have a minor fender bender early on that scares them into being more careful.  It can be expensive even with driver training and good student discounts, which you should take advantage of.

As long as your teen is living in your house, it’s almost always best to keep them on your policy.  You’ll be legally responsible until they turn 18 and even afterward if the vehicle remains in your name.  By staying on your policy, they will get the benefit of your discounts, such as a good-claims history, multi-car and multi-policy discounts, and better rates due to your credit score.  Some folks put kids on their own policy, often with very low limits of coverage, leaving big coverage gaps for the parents if the teen has a serious accident.  

I find when kids grow up and move out of the house, some parents have trouble cutting the apron strings, and they leave kids on their policy too long.  Once the child turns 18 and leaves the house, it’s a good idea to put the vehicle title in the son’s or daughter’s name and get them their own policy.  This frees the parent of the liability for an accident, even if they continue to pay the premium while their young adult adjusts to the costs of being on their own.  Parents can always put themselves on the vehicle title as a lienholder to keep some control while avoiding potential liability.  This can be a little tricky, so a long discussion with your insurance agent about specifics is a very good idea.