As a parent, watching your child grow up and start driving is a big milestone. However, when it comes to insurance, adding a young driver to your policy can feel like navigating a financial minefield. Here at LW&G Insurance, we understand the complexities and want to help you make informed decisions. Let’s dive into why it’s generally more expensive to get your child their own auto insurance policy and why keeping them on yours might be the smarter choice.
The Cost of Independence: Separate Auto Policies
1. Loss of Multi-Car Discount:
- When you insure multiple cars under one policy, insurance companies often offer a multi-car discount. This discount can be significant, sometimes reducing your premiums by 10-25% for each vehicle insured on the policy. Moving your child to a separate policy means this discount is lost, increasing the overall cost of insurance on a possible new policy.
2. No More Multi-Policy Bundled Discount:
- Many insurers provide discounts when you bundle multiple types of insurance, like auto and home, with them. If your child’s car is on a separate policy, you might not qualify for this bundled discount, which also contributes to higher premium costs.
3. Credit Score Impact:
- Young drivers, especially teenagers, often have little to no credit history. Insurance companies use credit scores to help determine rates, and a lower or non-existent credit score can lead to higher premiums. On a separate policy, this can result in significantly higher costs. In addition, the lack of driver experience on the primary rated driver also has a big impact on the pricing level or tier that is offered by a new insurance company.
Why Keep Your Child on Your Policy?
Financial Benefits:
- Maintain Discounts: By keeping your child on your policy, you continue to enjoy multi-car and bundled discounts, keeping your insurance costs lower.
- Leverage Your Credit Score: Your presumably better credit score can help in obtaining better insurance rates for your child.
Liability Management:
- Umbrella Coverage: If liability is a concern due to your teen’s inexperience, consider enhancing your coverage rather than opting for a separate policy. An umbrella policy or increasing your current umbrella limit can provide extra protection against potential lawsuits or damages without the need for a new auto policy. This approach covers not just auto incidents but other personal liabilities as well.
Simplicity and Control:
- Managing one policy is simpler than managing two. You have better control over coverage decisions, policy changes, and ensuring everything is up-to-date.
Conclusion
While the independence of having their own policy might appeal to some, financially and practically, it often makes more sense to keep your child on your auto insurance policy while they are still a resident of your household. Here at LW&G, we recommend:
- Retaining your child on your family policy to benefit from discounts and manage costs.
- Consider a personal liability umbrella policy or increasing your current umbrella limit to address any concerns about increased liability exposure.
- Sometimes there are legitimate reasons why you may need to have separate policies and those are situations that we can discuss if they occur.
- Once a child is out of the household, then it’s time for them to get their own policy – we are always happy to shop around these options and provide clarity when this time comes.
Remember, insurance isn’t just about covering the unexpected; it’s about making strategic decisions that protect your family’s financial well-being. If you’re unsure about the best approach for your situation, our team is here to help you navigate through your options. Let’s keep your family safe, secure, and financially smart!
Contact us today for a personalized consultation or to discuss how we can tailor our insurance solutions to fit your family’s needs.
Stay safe on the road!