By Aaron Crowe
As students return to school after summer break and seek to stretch their driving skills by driving to school, parents may be unsure if they need to add the new drivers in their family to their insurance policies. After all, “permissive drivers” are covered for the family car, so why shouldn’t family members? Permissive drivers are friends, for example, who may borrow your car and who don’t have their own auto insurance. Your policy would cover any damage they cause while driving your car. But there’s a big difference between “permissive” drivers and family members who can drive, Scruggs says. All licensed drivers living in a home must be listed on the policy, otherwise a claim they’re involved in could be denied, Scruggs says. Updating a policy when teens start driving allows insurers to correctly rate the policy, he says. However, there’s another side to auto insurance that many families don’t consider. Insurance “follows the car” in most states and parents don’t have to list their children as drivers on the family car insurance policy, says Chicago attorney John R. O’Brien. “This means that the policy on the car is primary, and anyone driving it with the owner’s permission is covered,” O’Brien says. He’s had teenage children who drove the family cars and weren’t added on the policy, and all of their claims were paid, he says.
However you decide to insure your teen or college-age driver, there are some ways they can get discounts and lower their auto insurance costs:
For students with a 3.0 GPA, equal to a “B” average, many insurers offer discounts of up to 25 percent through college graduation. Only the last report card is needed as proof.
Teenage drivers who complete a driving improvement course can get up to 8 percent off their policy at Farmers Insurance, Scruggs says. Many insurers also offer this discount.
For college students who have the chance to live at home with their parents and commute to school, they can save money in the longterm by building their insurance history on their parents’ policy, Scruggs says. But that only applies if they’re driving a family car. Once they buy their own vehicle, they need to have their own auto insurance policy, he says.
“Usually when they buy their first vehicle, that’s when they get their insurance on their own,” he says.
As mentioned above, owning a car is a good time to get your own policy. If the teen is past age 18, a policy separate from their parents can avoid increasing the insurance cost because parents’ coverage is usually much higher, says Frankie Kuo, a research analyst and auto insurance specialist at Value Penguin, a personal finance research company.
If a student lives at least 100 miles from home and doesn’t have a car at school, they may qualify for an auto insurance discount because they’d only be using the car when they go home.
For a college student who is only home during spring and winter breaks, it may be worthwhile for parents to remove the student from their policy. However, the student wouldn’t be covered for accidents on campus. The student could still drive at home during breaks, as long as it’s not for 30 days, according to Value Penguin . They’d then be considered a permissive driver, though during the summer they’d need to be added back to the family policy
Policyholders get to decide who is assigned the primary driver of which car, Kuo says. “Listing the teen as the primary driver of the least costly to insure car on the policy is one strategy to lower cost,” he says.
This is a long-term strategy, but helping your teen build a better credit score will help because a credit score affects an insurer’s risk assessment of a driver, Kuo says. Teens usually don’t have a credit history, so helping them get a student credit card or supplementary card can help them establish credit.
This is a no-brainer — and one that makes sense for every driver no matter what their age — but not getting speeding or other traffic tickets will lower your auto insurance significantly
Spencer Shulem, a 20-year-old who estimates he saved $40 a month by having good grades, says the good driver discount from not having tickets or accidents added up to most of his savings. “Having a ticket raises the rates a lot more than the discount of not having any tickets,” Shulem says.