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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. 

By
Laura Adams, MBA
10-minute read
Episode #503

Auto Insurance Discounts for Teen Drivers

While young drivers are expensive to insure, the good news is that insurers offer different types of discounts. Here are some popular discounts to ask for:

  • Distant student discount – could save up to 30% when your student doesn’t have a family car at a school and lives more than 100 miles away from home (even if the school is in the same state).  
  • Good student discount – could save up to 35% when your high school or college student has a “B” average or better. Parents do have to submit report cards to qualify, but it’s well worth the hassle and another great reason to make sure your student stays focused on getting good grades.  
  • Driver safety course – offered by some insurers if your young driver completes an approved driver education or defensive driving course.  
  • Bundling discountscould save an average of 16% nationwide when you combine your auto insurance with a home or renter’s policy. Checkout state-by-state bundling savings data.  
  • Pay-as-you-drive programsuse technology to monitor how you drive and reward you for safe behavior. You may also hear these programs called usage-based insurance, telematics (a hybrid of telecommunications and informatics), and pay-as-you-go insurance. Each insurer’s program is different and may not be offered in every state. They may collect data including how fast you drive, how hard you hit the brakes, where you drive, the times of day you drive, and mileage driven.  Enrolling one or all your vehicles allows you to qualify for discounts when the driver stays within safe ranges set by the insurance company. But if not, your rate doesn’t go up, you just don’t get the benefit of a safe driver discount.

See also: 5 Ways To Save Money on Car Insurance

Should You Title a Vehicle in Your College Kid’s Name?

State laws vary, but parents can be held liable for injuries or other damage a child causes in an auto accident when driving a vehicle registered in a parent’s name.

A question that Lynn brought up is how to title a vehicle that a child takes to college. If a vehicle and the insurance is in a child’s name only, is it less expensive or give parents more legal protection?

The answer is that state laws vary, but parents can be held liable for injuries or other damage a child causes in an auto accident when driving a vehicle registered in a parent’s name. If your son or daughter is over 18 years old, he or she can register a car in his or her own name. That’s one way to limit your liability if your child accidentally hurts someone.

In some states, you can purchase auto insurance for someone else, even if your name is not on the car’s title. So, it may be possible to keep a vehicle that’s titled in your student’s name on your family policy.

In general, it’s more expensive for a young person to have their own insurance compared to staying on a parent’s auto policy. That’s because they don’t have the benefit of a higher credit rating or various discounts that parents might enjoy, such as loyalty, multiple vehicles, and bundling with a home or renter’s policy.

However, it’s always worth shopping since there are so many variables at play. Lynn, if you have lots of assets to protect, then registering a vehicle in a child’s name may be a wise idea. But insurance premiums on the vehicle may or may not be higher, depending on what insurers in your state will allow.

See also: 10 Financial Products to Make Money and Create Security

How to Protect Liability When You Have a College Kid

If you don’t have many assets or can’t afford higher insurance premiums, another option for parents of young drivers to limit liability is to purchase an umbrella liability policy. These policies supplement the liability coverage you may already have on auto, home and renter’s insurance.

Umbrella policies are sold in million-dollar increments and typically cost less than $300 per year for $1 million of coverage, which is an extremely inexpensive safety net.

If you don’t have many assets or can’t afford higher insurance premiums, another option for parents of young drivers to limit liability is to purchase an umbrella liability policy.

Let’s say you get sued for medical bills after your child accidentally injures a pedestrian while driving. If you have $100,000 in liability coverage, but are found guilty for $500,000 in damages, an umbrella policy kicks in providing the additional $400,000 in protection.

Parents should also warn kids about lending their car to friends or roommates because insurance follows the car, not the driver. That means when you lend someone your car, you’re also lending them insurance to cover any damages they cause.

If a friend drives your car and causes a serious accident, your insurance would pay up to your coverage limits, and then the injured party would turn to the driver’s insurance for the rest. But if the driver doesn’t have insurance, you could be fully responsible as the car’s owner.

Having a claim or at-fault accident on your record causes your insurance rate to increase dramatically, even if you had nothing to do with the accident. Due to this huge financial risk, I don’t recommend lending your car to anyone except drivers who are specifically named on your insurance policy.

Likewise, if your child drives someone else’s car that isn’t insured or is underinsured, getting into an accident could mean trouble. Even if your student doesn’t take a vehicle to school, consider getting him or her a non-owner auto policy. That would protect you if your child borrows a friend’s car or gets into an accident as a passenger and the car owner’s policy falls short.

See also: 5 Surprising Insurance Facts and Savings Tips

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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-Hustlersbook 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.