The New York Times recently published “Adding a Child to Your Car Insurance? Here Are Ways to Hold Down the Costs,” a Your Money Adviser column by Ann Carrns. With more young adults living at home to manage higher living costs and student loans, a lot of families are asking the same question. When should a grown child come off the family auto policy, and when should parents start talking to their kids about car insurance?
Unlike health insurance, which lets children stay on a parent’s plan until 26, car insurance has no age cutoff. The experts Carrns spoke with said it really depends on the child’s circumstances, like where they live and whether they are still in school. Adding a young driver does push a family’s premium up, but it is usually still cheaper than buying them a separate policy, since young drivers benefit from their parents’ lower risk rating.
The article also gets into the conversation behind the cost. For that, Carrns turned to Wingspan Founder Christina Wing, a faculty member at Harvard Business School and author of Unspeakable: The Taboo Topics We Avoid and How to Talk About Them. Money is near the top of that list for most families, and Christina’s advice is to start talking about it early, as soon as a child gets their license. Some families have their kids pay their share of the insurance from day one. For parents who plan to cover the cost at first, it is still worth talking about insurance as one of the real costs that comes with driving. Show your child what it costs to add them to the policy, and explain that while you are covering it for now, they will eventually be asked to contribute. The point is to get kids used to talking about money while the stakes are still low. She also recommends agreeing ahead of time on when a child will move to their own insurance, so the change never comes as a surprise.“I never think you should just take it away. It’s about readiness, not age.”
The rest of the article walks through the practical options. Students can usually stay on their parents’ policy, even if they take a family car to college or go on to graduate school, and families whose kids head to campus without a car can ask about an “away at school” discount. Once a child graduates and moves a car to a new permanent address, they should get their own policy. Where a car is kept affects the rate, and leaving an adult child on the family plan in that situation can cause real problems if a claim is filed.
Others in the piece echoed Christina’s point about readiness. Anthony Schilt, a 24-year-old in Columbus, Ohio, started paying his parents toward his share of the policy at 18. “It helped me practice paying the bill,” he said. In his view, the move to separate coverage should be based on “a trigger, not a birthday,” like moving into your own apartment or saving enough to cover the deductible and two months of premiums.
For a lot of young adults, car insurance is one of the first real bills with their name on it, which makes it a natural place to start. It’s a small version of something Christina sees with the families she advises. The conversations people put off tend to be the ones that matter most later on.
Link to the full article below.
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