For many young drivers, insuring a vehicle is too much of an expense for them to take care of on their own. Even if they pick up a summer job, the cost of an independent policy for a young driver is simply not feasible.
In these instances, it’s common practice for parents to put their children on their car insurance to keep costs down. However, as your child gets older, it becomes much easier for them to afford their own policy due to reduced premiums as a result of a reduction in their perceived risk.
This article will take a look at some factors that influence how long you can keep your child on your car insurance and when the right time will be for them to take out an independent policy. Let’s get into.
Photo attribution: State Farm licensed under Creative Commons 2.0 Generic (CC BY 2.0)
The Cost of Independent Insurance for a Young Driver
Adding a teen driver to your insurance policy is going to be expensive, however, it’s still far cheaper than if they were to get their independent policy. As you might expect, young drivers are considered to be more of a risk on the road than those with more experience, and the annual premium they must pay reflects this.
The average cost of an annual insurance premium for 16 to 19-year-old drivers is $3,000. This fee jumps down to around $2,000 for 20-24-year-olds, and then to $1,700 for 25-29.
In addition to this, it’s also worth taking note of how gender plays a role in the average insurance premium. There are no prizes for guessing that young male drivers are significantly more expensive to insure than females. On average, an 18-year-old or younger male driver will cost around $7500 per year to insure, compared to $6300 for a female.
As you can see from these figures, the cost of insuring a driver drops significantly the older they get. You need to calculate your finances, crunch some numbers and decide whether or not it’s viable to add them to your insurance plan or for them to take their own.
You can add-on your child to your policy as soon as they are of the legal driving age and have obtained a driving license.
The good news is your child will begin to establish insurance history even while they are on their parent’s policy, which is important if they wish to obtain a less expensive premium in the future.
When Will Your Child Need To Have An Independent Policy?
If you already have your child on your car insurance you may be wondering when is it time for them to flee the nest and set up their independent policy. First things first, there is usually no age limit for having a child on your insurance policy, so if you feel you can keep your child insured there for as long as you wish. However, this does vary between policy providers.
For example, if at any point your child decides to work for a rideshare company then they must take out rideshare insurance on their own as the standard level of coverage from their parent’s policy will not be adequate.
Here are a few factors that may influence whether or not your child should get their own insurance policy:
- If they are financially independent
Some insurers will have a threshold where they consider a child to be financially independent. Once they reach this level they will no longer be able to be insured on their parent’s policy.
- If they are married
If your child marries this signifies they are financially independent and could disqualify them from using your policy.
- If they leave home
Similarly, if your child leaves home and lives in an apartment or home by themselves, this may disqualify them from being on your coverage.
- Poor accident history
Poor accident history can make it difficult and expensive to insure your child on your policy.
- Previous DUIs
Any DUIs and they must be removed from your policy. This one is kind of a no-brainer.
- If you can’t afford the premium
Lastly, if you can’t afford the premium of insuring your child then unfortunately you are going to have to set them on their way.
Whichever way you decide to go, having car insurance for your child is vital. Not only does it protect them from a massive financial liability if there were an accident, but it also assures them for repairs, replacements, and any potential medical claims as a result of a car accident injury.
Mike Austin is the marketing assistant for UberInsurance.com. Mike prides himself on product knowledge and understanding the everyday changing market, which is why he keeps sharing his knowledge and expertise with others.
Editor’s Note: The opinions expressed in this article are those of the author.