Car Insurance: Guidelines on When Your Kids Have Their Own

I was talking with a prospective client this week who has a daughter graduating later this month from a university in Texas. The question they were grappling with was whether to keep her on their car insurance that I would be quoting, or to have her get her own policy since she has a pretty nice job lined up. I run into this a few times a year and thought we’d examine how I suggest they approach the decision.

There is no “right” age for an adult child to get their own car insurance, however, there are some factors that tend to guide this decision.

  • Where the adult child will live upon graduation
  • The financial ability of both the parents and the new graduate
  • The graduate’s age
  • What the carrier will “encourage”

If the newly minted graduate will live in the same state, they can leave them on their policy. The one change the parents should make to their car insurance policy is to change the garaging address of the vehicle the adult child has to their son or daughter’s new address. Such a change could lower or increase the rate based on rates where the graduate lives, whether they’ll be renting a house or an apartment, etc.

If the child is moving out of state, then I recommend they go ahead and secure their own car insurance with an agent in their new home town. The reason for this is that the son or daughter are establishing their own residency and usually means registering the vehicle in their name in the new state.

Next, the parents should evaluate the adult child’s financial ability to pay for their own car insurance. Launching out on your own requires funds to secure an apartment, buy furniture, work clothes, and in some cases, begin paying off student loans. It may be financially helpful to delay requesting a son or daughter get their own policy until a later date when they have fully transitioned to paying their own bills and are able to manage a budget, provided they remain in state.

Most insurance companies in Texas don’t recognize a man or woman as an adult until they reach the age of 25. This is usually the age where we see a significant decrease in the car insurance rate, provided they have no claims or tickets. When the adult child lives in the same state, and the parents are willing, I recommend they leave their son or daughter on their policy until they turn 25. This keeps the adult child’s premium lower because they can take advantage of the multi-car discount and the lower rate the adult may have due to their driving experience.

The final determining factor is the car insurance company’s underwriting guidelines. Some companies will require the graduate get their own policy since they are living in a separate household while others will allow them to remain on their parent’s policy. It’s always good to confirm with your car insurance agent what the company will allow.

What do you think? Share your thoughts, suggestions, and questions with me in the comments section of our blog or on our Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

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