Sunday, October 7, 2012

Adding Your Children Onto Your Insurance Policy: Pros and Cons

Day 209 - West Midlands Police - Uninsured veh...
 (Photo credit: West Midlands Police)
Many parents in their forties and fifties have older children who are ready to buy their first car, graduate or enter college, and/or getting prepared to live on their own for the first time. 

At a time when parents seek to save for retirement, costs for older children are taking a chunk out of their savings: Buying their teenager a vehicle, paying for college expenses, helping with costs of the child’s new living arrangements, and car insurance. 

Navigating finances at this stage is quite the juggling act. After all, parents who are fast approaching retirement need to find the balance between their budgetary expenses, saving for retirement, and contributing to an older or adult child’s expenses and needs. 

Sometimes parents have to draw the line and give their child the entire responsibility of providing for themselves. When it comes to car insurance there are advantages and disadvantages for both parents and teenagers of sharing an insurance policy. Let’s break it down. 

Pros for Parents 

· If the parent’s name is on the title of the vehicle or on the loan, they should be cognizant of proper protection against major unexpected loss. By having control over the amount of coverage on the vehicle, parents can be assured of proper coverage. As long as a parent’s name is associated with ownership, they will have a legal responsibility for any liable losses.

· The child’s cost for their portion of the car insurance will likely be far less, which may mean that parent’s won’t have to help them out as much financially. 

Cons for Parents 

· The cost is obviously the biggest drawback if parents are the ones who have to be responsible to pay the premium.

· In the same way that a parent can be liable as a co-owner named on a title or loan, as a policyholder, a child may cause an accident and the injured party may try to go after the parent as one of the policyholders, even if their name isn’t on the vehicle. If the parent’s name isn’t on the title or loan, they might want to consider having a separate policy for the child. 

Pros for Children 

· The most obvious benefit to adult or older children listed on their parent’s policy is that the cost of the car insurance they are responsible for will be typically far less than if they had to pay for a car insurance policy on their own.

· Older and wiser parents often carry better protection for liability. Younger drivers who often pay the highest premiums will try to get by cheap and cut coverage as low as possible.

· The good thing about having the child start out on their parent’s policy is that they can “spin off,” taking valuable discounts from their parents to their own policy. 

Cons for Children

· On the rare occasion that the parents have a poor driving history, the child might be paying more for insurance than if they were on their own policy.
· If the parents find themselves in a large lawsuit for auto liability, the child could be pulled into it if the parent isn’t covered for the judgment award. 

Parents don’t often find the silver lining in their car insurance premiums doubling by adding an adult or older child as a driver or co-owner of one of the vehicles. However, having the child/children covered on the parent’s insurance policy does have its advantages, too. 

Carefully weigh the options and discuss with the agent and insurance company all the possibilities before making a snap decision. Your retirement income and investments depend on smart financial decisions you make now. 

Steven Weinberg is licensed insurance and expert writer at Car Insurance Calculator where he covers typical consumer questions as well as a weekly blog on insurance news for US consumers from all states. 

1 comment:

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