What Insurance College Kids Need and Tips to Save

Make sure you don't skimp on insurance needs for your college student. Laura answers a listener question about how to handle vehicles for students and shop for insurance. Plus, you'll learn other important considerations to protect your belongings and liability when you have kids away at school. 

Laura Adams, MBA
10-minute read
Episode #503

What Insurance College Kids Need and Tips to SaveLynn M. says, “I’m a weekly listener and have learned so much while logging miles on my runs! I love getting financially and physically fit at the same time! I’m a divorced mom and my three children will all be in college starting in the fall. Ouch! Fortunately, I’ve saved in a 529 plan, have liquid savings earmarked for college, and will split tuition with their dad. But when it comes to cars for the children, how should I handle titles, insurance, and shopping for competitive rates when they go to school out of state?”

Thanks so much for your question, Lynn. You get the mom-of-the-year award for being financially prepared to send three kids to college with vehicles, and still having time to stay in shape!

Most parents spend a lot of time agonizing about how to pay for a child’s education, but completely overlook their insurance needs. In some cases, your existing policies won’t give your family enough protection after a kid goes off to college.

In this post, I’ll review a variety of factors that affect the additional insurance your college-bound kid needs. Plus, you’ll get tips to cut insurance costs and make college more affordable.

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Auto Insurance Rate Increases for Teen Drivers

If your student is already driving, I don’t have to tell you that your auto insurance rate goes through the roof after you add a teen driver to your policy. Young drivers are extremely expensive to insure because statistics show that they get into accidents more frequently than older drivers.

A study I helped created about how much auto insurance rates go up when you add a 16- to 19-year old driver to a policy revealed that rates rise 78% on average nationwide! Rhode Island residents see the highest spike, with a 153% increase, and Hawaii has the lowest increase at 8%.

Yup, one more reason moving to Hawaii might seem like a really good idea. It’s the only state where insurers are banned from using a driver’s age or years of driving experience as a rating factor. So that small increase is the same as adding an adult driver to an auto insurance policy.

The good news for residents of the other 49 states is that girls cost less to insure than boys, and both get less expensive every year, if they keep a clean driving record with no moving violations or accidents. If you don’t see your rates for a young driver come down, be sure your auto insurer knows when your teen celebrates a birthday.

Insuring Your College Kid

Unlike other types of insurance, there’s no rule that you must take your child off a family auto policy at a certain age. Parents can keep a child on their insurance for as long as they like.

College students are typically covered under their parents’ car insurance, as long as they live at the same address as their parents when not at school. Esurance says, “If a student starts out listed on a policy and will be temporarily attending school at another address, we allow them to remain on the original policy as long as their vehicle is still registered at the original address.”

Unlike other types of insurance, there’s no rule that you must take your child off a family auto policy at a certain age. Parents can keep a child on their insurance for as long as they like.

Assuming you want to maintain coverage for your college student, you need to let your insurer know. If he or she will be driving out of state, your policy may need to be adjusted because auto insurance varies dramatically from state to state.

For instance, if you live in Florida, where the state minimum liability limit is $10,000 and your student attends school in Texas where the limit is $30,000, your policy won’t meet the requirement.

Auto insurance rates even differ down to the ZIP code, so the address of the college or the location where a car is typically parked is important. Rates for city drivers tend to be higher than for those in rural areas.

So, depending on where your college kid lives, having an insured vehicle in a different location could cause your rate to go up or down. But don’t be tempted to avoid telling your insurer. They can deny claims or cancel your policy if they discover that you misrepresented where an insured car is garaged.

You don’t need to notify your insurer when a student makes a short trip home for school breaks or between semesters, just when he or she moves to a new location for most the year.

Another consideration is how your child plans to use a vehicle while at college. If he or she has a job, such as delivering pizza or groceries, make sure it’s covered for commercial auto activities. Some auto policies won’t cover claims for accidents that happen while you’re driving for any business use, other than commuting to work.  


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.