Anuj Kasera
By Anuj Kasera
Last time we discussed the insurance requirements for new immigrants, who must take their own separate insurance. In this article we will talk about the insurance implications of adding your teenager to your policy. You must consider not only the cost of adding the new driver but also the risk to your personal assets if your child is involved in a major accident.
Your auto insurance policy will cover all licensed members of your household if they are listed on your policy. If your child is not listed on your policy and has an accident, the carrier may deny the claim, and you will be responsible for all damages.
When to add a child to your policy:
Learner’s permit: Your child will need to get a learner’s permit as the first step. Many insurers do not require you to add a child with a learner’s permit but do let your carrier know as rules differ from company to company. Premiums typically remain unchanged until the individual obtains their full license.
If you have a business auto policy, it may be different. Your company may add your child as an additional driver with no experience and that will increase your premium. Talk to your agent or company at the earliest to avoid any surprises.
Once fully licensed: You will need to add your child to your policy as soon as they are licensed. Your insurance company will be notified automatically by the DMV when a new driver is added to your household. Do not take the risk of waiting for the insurance company to force the update. Until you add the new driver, you may be personally liable for any damages in an auto accident involving your child.
Rates will most likely go up as your child will be considered inexperienced and higher rates will apply. Most insurers will consider them new drivers for the first three to nine years. There may be some steps you can take to reduce the impact as discussed below.
Parent policy vs. Separate policy: A child living at home or going away for full-time college can remain on the parent’s auto policy. Separate policies are almost always more expensive. If the child who lives with you gets their own vehicle, you can still add the vehicle to your policy to save money.
If the child is away in college and gets his own car, most likely a separate policy will be required. Rules differ from carrier to carrier and so you may want to shop around or talk to your agent.
You may also want to get a separate policy for your child if you are concerned about personal liability exposure. Remember that insurance follows the car. Regardless of who is driving, the owner of the car is responsible for the damage that exceeds the insurance policy limit. Consider increasing your policy limits or getting umbrella coverage that will protect you in such situations.
How to reduce the impact of rate increases
● Many insurance companies offer good student discounts for those who maintain a GPA of 3.0 or higher.
● Evaluate whether you can raise your deductible. A deductible is the out-of-pocket amount that you will have to pay for your property damage before the insurance company pays you. Just make sure that you can afford the higher out-of-pocket cost in case there is a claim. A higher deductible can lower the premium significantly.
● Review your policy to see if you need full coverage on the old cars. If your teens are driving the older car with low market value, you may be able to reduce the coverage to decrease the premium. Just understand the implication of the reduced coverage. Full coverage may be required if the car is financed or leased.
● Choose the right car for your child. An older, used car will be cheaper to insure than newer, sports car.
● Some companies may give driver education discounts by completing an approved driving course.
● Sign up for the tracking program where the insurance company can track the driving habits like speeding and harsh braking. Safe driving will reduce the premium over time, but conversely poor driving habits will increase it.
● If your college student lives more than 100 miles away from home and does not have a car, you may be eligible for a distance student discount.
Finally, one of our client’s son hit a parked car while backing out of the parking lot. He did the right thing by leaving his contact information on the other party’s car. He could have walked away but with cameras all around, there would have been serious repercussions as it would be considered hit and run. So, explain the importance of honesty and safety to your child. It will go a long way!
We will cover the accidents and claims in another article.
Anuj Kasera is a long term resident of Charlotte, NC and owns an insurance agency, focusing mostly on home, auto and business insurance. He can be reached at anujkasera@gmail.com.
