Should I get off my parents' car insurance policy?

We get a lot of car insurance questions from people who are in a moment of change - finishing college or grad school, starting a new job in a different city, or reaching a milestone birthday. We’ve collected the specific questions we often hear when people are deciding whether to stay on their parents’ car insurance policy or purchase their own.

Q: I’m 26. Do I have to get my own car insurance?
A: In a word, no. The age of 26 is only important when it comes to health insurance. In 2010, President Obama signed the Patient Protection and Affordable Care Act into law. We often hear it referred to as the Affordable Care Act (ACA) or Obamacare. The law expanded healthcare coverage for young adults,
enabling them to stay on their parents’ health insurance until they turn 26. It does not apply to auto insurance. In other words, you won’t age out of your parents’ car insurance.

Q: I don’t own a car. Do I need my own car insurance?
A: This is a nuanced answer: You don’t need to have car insurance if you don’t own a car. However, if you ever drive, you need to make sure there is insurance protecting you, even if it’s someone else’s policy. Always check with the owner of the car or the rental car company when you get behind the wheel.

There are situations when purchasing your own auto insurance may be a smart move, even if you don’t own a car. If you frequently rent or borrow cars, you might be better off with a coverage called non-owner car insurance. This insurance provides coverage whether you’re driving someone else’s car, renting, leasing, or carsharing from Zipcar, Turo, or Hertz, or even riding a bike.

How does non-owner car insurance work?

• If you rent cars regularly (including through various rideshare or carshare options), non-owner insurance may be cheaper than the daily liability insurance fees.
• If you buy a car and purchase auto insurance later, having non-owner insurance now can count toward your being continuously insured — and make you eligible for discounts

• If you want to buy umbrella insurance, many carriers require you to have car insurance. Non-owner car insurance is perfect if you don’t own a car.
  • Umbrella insurance covers a higher amount than a regular auto, home, or renter’s policy.Most policies max out at $300,000 – $500,000 of coverage. If your property is worth more, you may want an umbrella policy.
  • It tends to be for those with many assets, who want to stay protected.

• If you’re a passenger in a car that gets into a crash, your non-owner car insurance may be better than the driver’s, which may give you peace of mind — and coverage.
• If you ride a bicycle often or to work, non-owner insurance will cover you and your gear — even if there’s a crash, and the driver that hits you takes off or has no insurance.

Why should I get off my parents’ car insurance policy?

Here’s a list of the most common reasons you should get off your parents’ policy:

You:

• Live away from your parents (permanently, not just during the school year).
• Own a car.

• Drive only for work (This differs from driving to work).
  • If you drive for work, your company should cover your auto insurance.
  • If you drive for work, but work for yourself, investigate commercial insurance.

• Are building your insurance history to take advantage of future discounts.
• Want to make your parents’ bills lower.

What would convince me to stay on my parents’ car insurance policy?

You:

• Live at home and drive your family’s cars.

• Drive only for work (This differs from driving to work).
  • If you drive for work, your company should cover your auto insurance.
  • If you drive for work, but work for yourself, investigate commercial insurance.

• Borrow the family car regularly.
  

If you live with your parents, and do not own a car, but drive their cars occasionally, you should probably stay on your parents’ car insurance.

How do I choose my first car insurance policy?

It’s official. You’re buying a new (or new to you) car! Before you hit the dealership, and lock eyes on a shiny new machine, take a deep breath. The process can appear daunting, so here are a few questions you may be asking, along with our answers.

Q: Do I need car insurance to take a test drive?
A: No, but the dealer or owner does.

Q: Do I need an insurance policy just to take my new car home?
A: Yes, but it takes a fairly short time (approximately 30 minutes) to buy an auto insurance policy and have the company send your proof of insurance to the dealer.

Q: How much insurance do I need?
A: Each state mandates the minimum amount of coverage you’re required to carry. That said, it may be wise to purchase more than the minimum. If you are making payments on the car, the lender may require you to buy collision or comprehensive insurance.

Q: I want to drive for a ride-sharing company. Do I need a specific policy for that?
A: Yes. The good news is many insurance companies now offer these policies.

Q: I got a few quotes and they’re really high. How will I be able to pay all that in one lump?
A: More good news! Most insurance companies offer payment plans. You can usually pay a percentage of the total cost each month.

Q: I noticed when I got my quotes on the different cars I looked at, the prices varied, often by quite a bit. Why is that?
A: The cost of your insurance takes into account the make, model, and age of your car. The newer and pricier the car, the more it will cost to repair or replace after an accident.

If you know what type of car you’re looking for, you can get more accurate estimates from car insurance companies. It’s always good to know in advance how much to budget for your monthly car expenses (payment + insurance + fuel + maintenance). It may help narrow down your car and car insurance choices as well. It’s also good to think about the degree of difficulty in getting a quote. If it is hard to get a straight answer at this stage, imagine trying to file a claim after a crash.

Should I stay or should I go?

Your specific life situation matters when it comes to having your own insurance or staying on your parents’ policy. Doing the research to make sure you are properly covered is worth it — after a crash is a terrible time to figure out that you’re not covered. An insurance agent will be able to walk you through the right coverage and give you peace of mind. If you feel you are ready, here's how you get off your parent's policy.