The Teen Benefit Of Parents’ Auto Insurance

Eighteen is generally perceived as an age of young adulthood and independence. It’s a time when many young adults move out of their parents’ home, jet off to college and maybe even get their first car.

However, a recent study shows independence may not pay when it comes to auto insurance. In fact, it’s typically less expensive for young drivers to remain on their parents’ auto insurance policy rather than getting their own.

Laura Adams, senior insurance analyst for, said young drivers in the state of Wisconsin add an average 67 percent to their parents car insurance bills.

According to the National Association of Insurance Commissioners, the average annual cost for auto insurance for Wisconsin drivers is about $600. So, adding a young driver, would increase that insurance rate by about $400.

Adams said, however, it costs 19 percent more than that for 18-year-olds to get their own car insurance. Meaning that young Wisconsin drivers would pay almost $1,200 to buy their own insurance.

“So staying on their parents’ policy is a much better deal,” Adams said.

Although 16 is the age when a person can become a licensed driver, Adams said 18 is when most insurance companies begin judging drivers as adults and policy holders.

Jerry Ratajczak, owner of Appleton AllState Insurance Agency, said young drivers pay higher rates because they are considered to be a high risk because the possibility of accidents and citations is greater. He, too, suggests, spreading out that risk by remaining covered by parents’ policies.

“An 18-year-old assuming 100 percent of the risk means they are going to pay a higher premium,” Ratajczak said.

Adams said individual coverage expenses vary state by state, as each has its own rules and regulations.

The study indicates 18-year-olds in Rhode Island pay 53 percent more on average for their own coverage than they would if they were added to their parents’ policy. Young Illinois drivers pay only 7 percent more for their own policies.

Adams said the main reason young drivers usually pay more has to do with overall life experience.

Having little or no credit is the first strike against a young driver looking to become an insurance policy holder. The second strike is having only limited driving experience.

“These drivers don’t have some of the same benefits their parents do, such as a discount for multiple vehicles and credit,” Adams said.

Adams and Ratajczak both suggest young drivers interested in relieving parents from the financial burden of insuring them can still stay on their parents’ policy and then reimburse their parents after.

Remaining on an existing policy or choosing to get individual coverage is situational, though. In the rare circumstance where both parents have bad driving records, or a young driver buys a new, expensive vehicle, they suggest separating from that policy as it may be more financially sound for everyone involved.

Source: Green Bay Press Gazette 



Leave a Reply