For parents of high school seniors, this time of year involves a lot of future planning. College acceptance letters are beginning to arrive, trade school decisions are being made, enlistment requirements are being checked off, and life after high school is becoming more reality than idea. It’s both exciting and intimidating for parents and kids!
With a new level of independence comes a responsibility to sort out account management. Young adults might come into control of custodial bank accounts, apply for a first credit card, and buy their own car. If a car is part of your teen’s post high school plans, make sure it is properly insured under the right policy. In fact, it’s best to determine who should carry your young adult’s auto insurance policy before they finalize the purchase. Insurance mistakes can be a very costly lesson to learn at this early stage of independence.
Ownership of the Car Determines Insurance
The single most important determination in who can carry a car on their auto insurance policy is who owns the car. This also happens to be the number one mistake that parents and teen drivers make when teens take ownership of their first car. The car must be titled to the person who has the insurance policy.
When parents call us to say that their older teen just bought their very first car, they typically want to add the car to their own auto insurance policy. This makes sense since adding it to an established policy owned by older adults is less expensive. Confusion sets in, though, when we ask whose names are on the title of the car. If the teen bought the car themselves with their own money, it’s a huge rite of passage to be the title holder. Unfortunately, that means they need to buy their very own (much more expensive) car insurance policy. As much as the teen driver may not like doing this, they will save the most money on insurance by adding one of their parents’ names to the title to remain on that policy.
The Car’s Location is Important for Proper Auto Coverage
The car’s location also has an impact on the insurance policy. If the teen is headed off to collegeor boot camp without their car, keeping it listed under the parents’ policy is standard. Teens who take their car to college or trade school can usually still stay on their parents’ policy, but the carrier needs to know where the car will be kept most days. Students going to school out of state might need policy language that matches that state’s requirements. They also need to find out if the other state has registration requirements based on how long the car will be there.
When college students do not take their car to school, many insurance carriers offer a discount to reduce the premiums for when there is one less driver in the house. If the student changes their mind and moves the car to school, however, the policy needs to be updated to reflect the car’s actual location. If a claim event happens, the insurance company will scrutinize where the car was being kept at the time. We hate to see claims being denied, but not updating the policy to where the car is being “garaged” is a common reason.
We encourage clients to reach out as soon as their teens start driving, even before they have a car, so that we can explain all the different scenarios to consider for the next several years.
When your young adult officially leaves home, meaning they will establish a new permanent address, it may be time to move them to their own auto insurance policy. Car insurance carriers each have their own definitions of who can be in a household. Usually, young adults who are away at school or basic training are still part of the household. But when someone moves into an apartment, and plans to stay there even over college breaks and following graduation, they are probably fully independent. Not only is it time to shop for their own car insurance policy, but they also need a renters insurance policy to protect their personal belongings.
Choosing Adequate Limits for College Car Insurance
From a budget standpoint, most young adults are looking for the lowest cost car insurance. Parents may be looking for the same thing if they are also helping with other expenses. But the cost of insurance premiums can’t be the only consideration for teens and parents. Low premiums usually mean high deductibles and low limits. The result is that when there is an insurance claim, the out of pocket costs can end up being pretty high.
Talk to your insurance agent about your financial concerns upfront. Your agent can help you think through the scenarios and help you arrive at the most comfortable number. We’ll review things like:
• Higher risk profiles for younger drivers, which calls for liability limits above the PA minimum
• Having adequate coverage for a car that is being financed
• Moving money into a savings account to make sure there’s enough to pay deductibles and something toward a new car if theirs gets totaled
• Obtaining an affordable umbrella policy for an extra layer of protection above auto liability limits
Car insurance is a necessary life expense for families and newly independent young adults. Understanding what insurance is meant to do and how it works is really vital to helping teens prepare financially and mentally for various life events.
Protect Your Young Adult Driver with the Right Auto Insurance in Pennsylvania
Launching a young adult into the world, even if incrementally for a while, is a huge learning experience for parents. Not all the responsibility needs to be transferred in one fell swoop, though. Families have time to support their older teens as they learn to navigate the world with more independence. Insurance is certainly a product that parents can hand off over time.
If you are the first time parent of a high school senior, you simply don’t know what you don’t know! At Smyrl Insurance, we educate, nurture, and empower parents and young adults through the insurance questions and responsibilities so that they have the right coverage for their actual circumstances. Not only have we navigated these scenarios in our own families, but we regularly work with multiple generations of the same families, offering guidance through all the phases of change and independence. Contact us to review your teen’s plans following high school, and we will help you determine the way forward with insurance solutions that make the most sense. We work with families for car insurance, renters insurance, umbrella policies, and many other types of insurance in more in Hatfield, Lansdale, Souderton, Harleysville, and throughout the region in Montgomery County and Bucks County, Pennsylvania.
