Can I save money by taking my college driver off the policy?
Dear Richards Group:
My son/daughter is going to school / studying abroad / blah blah- and will not be using the car for the next 9 months. We are thinking about taking him/her off the insurance policy since he/she does not have a car to drive at school and it would save us some money. Is this okay?
Sincerely, Your favorite customer
First of all- this IS my favorite customer because this customer asked us the question before they just decided to do it. We LOVE it when customers ask us for advice on how to appropriately handle their needs. Even when they don’t follow said advice- at least they got the information and proceeded with the proper education.
Yes- you can take this driver off the policy- if you can prove they do not reside in your home. In this case, he/she lives at another address for longer than 6 months and does not garage a vehicle on the policy at this new address. So technically- the answer is yes.
And yes, obviously, taking this driver off the policy would save you money in the next two policy periods. Less drivers translate to less risk translates to less money you have to pay for the insurance.
But- let me tell you why I do not recommend this.
Because where-ever your child is living, he or she does not have auto insurance.
1. In some states- it is required that you carry auto insurance. It is in Wisconsin. If you son/daughter is sitting in the residence halls or his/her apartment off campus and borrows a vehicle from a friend just to run to the grocery store and gets pulled over and gets a ticket and needs to show proof of insurance- he or she won’t have any. Then they will have a ticket for having no insurance on top of whatever they were doing that got them pulled over in the first place.
And before you go thinking your child will never borrow anyone’s vehicle- ask yourself this- what happens if your college-aged student is at a party that he/she walked to (like a perfect angel)- and someone they are friends with at the party (who drove) is too drunk to drive home. Their drunk friend is trying to get into their car and your perfect angel, who is completely sober, decides to drive them home so that they are not a danger to anyone.
2. If your son/daughter does borrow someone’s car and does get into an accident with it- the person who lent them the car’s insurance will be the insurance policy that pays out- thankfully. (You lend your car, you lend your insurance). BUT- if it is a more serious accident and the person has lower limits- you could be in trouble.
Let’s just say that your child strikes a minivan and totals it- causing about $17,000 worth of property damage. There were also 3 people inside that were injured. One was quite severely had had to be flown via flight for life and had a a couple of surgeries ($220,000). The other two were less severe ($60,000 and $38,000) totaling $318,000. The student who’s car your child borrowed had lower limits of 50/100/10.
In this example- there is a gap. $7,000 on the property damage and $218,000 for the bodily injury liability.
If your child is listed as a driver on your policy- if the insurance that the car owner’s is not enough- then your policy steps in as a secondary policy. If your child does not have any other insurance, your child would be responsible for the rest out of pocket. Since your child is over 18 and a legal adult- they can be sued and their wages can be garnished for the rest of their life.
In this example- if you had 100/300 limits- you would take care of most of this burden. If you had 250/500 limits, all of it would be gone.
Personally, that is a hard way to start out your new… bright… future… after you graduate college.
3. Lastly, did you know that everyone has something called an Insurance Score? It is kind of like a credit score- but it is exclusively for insurance companies. It is something that insurance companies use to get a sense of how risky a person is so that they can get an idea of how to accurately rate you on a policy.
There are something like 100-some components to an Insurance Score- some weighing more than others. But one of the most looked at items is how long you have gone without prior insurance.
When a company takes on a new customer (like your son/daughter when he or she goes out as an “adult” and get his/her own policy) they will look and see if they have prior auto insurance. Fair or not- it doesn’t even matter if he or she has had a car before. Being on your parents insurance policy counts. The more years you have gone without a gap- the better your score. If you started on your parents insurance when you were 16 and you are now 24- you have 8 years of prior insurance- which is great. If you started at 16- but had a gap for a month at 21 and just bought car now- you now lost all of your prior insurance. You start back at zero.
Anyone with zero prior insurance history (even a gap of one day) is going to be a on a “high risk” auto policy. Anyone with less than one year is going to be on a high risk policy. To qualify for standard companies- you need to have a year of prior insurance.
So by taking your child off your auto policy, unless you are going to be putting them back on for at least a year, you are setting them up for a higher price when they are “adulting” on their own.
So in conclusion- the answer is YES, in some cases you can technically take your child off your policy and yes, it can save you some money.
But at the same time- saving some money on your monthly or every-six month auto insurance bill may end up costing your child some pretty serious money later on- whether that be in tickets, money paid in an accident, or in their own increased auto insurance rates when they are trying to “adult” once they graduate.
Every family is different- so as long as you know the pros and cons- you can make your choice wisely, but please make sure your child understands what it means that they do not have insurance if you take them off your policy.