Your young adult may be the best driver in his or her class, maybe even the whole town. However, as a group, younger and less-experienced drivers tend to have more driving mishaps than many other demographic groups. If you are thinking about adding your young adult to your auto policy, here are some things to keep in mind. Insurance rate formulas depend heavily on group statistics, such as accident frequency by age group or even factors relating to the type of vehicle itself. As a result, a younger driver often pays more for the same coverage when compared to a driver a decade or two older.
Often, the least expensive way to insure a young driver is by adding them to your policy rather than having your student buy his or her own insurance. Every family addresses this timeless dilemma in their own way, but there are some factors to consider that may affect your decision.
If your student does not own a vehicle, but is a licensed driver and lives at home, you will need to add them to your policy. From the insurer’s standpoint, it is likely that your student will be driving your vehicle at some point and therefore should be covered either by your policy or his own. In fact, some insurers have added drivers to a policy — much to the surprise of the policyholder — for this very reason. The insurer identified a licensed driver at the residence who was not on the policy and who did not appear to have his own policy. Understandably, insurers want the premiums to match the risk.
However, if your student is away from home at college, your insurer may offer a discount because the risk is reduced while your young driver is away and will not be driving your vehicle. Insurers who offer this discount may have their own definitions for away at school, such as requiring a distance of 100 miles between your home and the school. Also, be sure to ask about a good student discount if your young driver performs well in school. Many insurers offer this discount; insured households often leave money on the table by not sending in transcripts or asking about the discount.
However, there are situations where your student driver needs his or her own policy. For example, if your young driver purchases a vehicle in his or her name, many insurers will require a separate insurance policy for the vehicle because the vehicle is not owned by the parents. The young driver owns the vehicle. Generally speaking, insurance follows ownership, which is why you cannot insure your neighbor’s house when you notice a tree that might fall on their home in the next big storm. The technical name for this concept is insurable interest, which refers to the idea that you cannot insure a risk if you do not have a potential loss.
Insurance rules vary by area and each company may have its own policies. As soon as your student driver earns their full license, and the freedom that comes with it, it’s time to talk to your broker about the best insurance strategy to protect your family and your young driver.