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Why and How to Protect Yourself from Your Child


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A young driver can be a nightmare on the road. For this reason, adding them to your policy could cost a small fortune, but it doesn't even compare to the reality of what you could lose out of pocket in the event of a serious accident. Until the age of 18, you are responsible for what your child does behind the wheel, however, after that age, there are steps you can take to protect your finances in the event the worst should come to pass.

The first key is to separate them into their insurance policy. There are a few steps you need to take to make this work, first and foremost is to turn the title of the vehicle over to them. Once they own the vehicle, you are no longer responsible for the driver behind the wheel. After the vehicle is titled in their name, they can then take out an auto insurance policy for themselves.

If your child continues to reside in your household, your insurance company may request that they stay on your policy even though they have their own. Although this does not make you liable for any damage they cause, it can make your insurance costs far higher then they need to be. However, in most states, you have the right to exclude them from your policy. This would mean they can only drive their vehicle, the vehicle they have insured under their name. However, their risk factors would not apply to your vehicles, drastically reducing the risk of your policy.

That does not mean all of that cost needs to shift to them. Your child can place you on their insurance as permissive users of that vehicle and, in most states, your risk rating would be averaged with theirs, and that figure would be the one used for the vehicle they are insuring. Being listed as a permissive user on their policy does not make you liable for any of the damage they do, it just means you have their permission to operate the vehicle, and the insurance company would cover a claim if you were operating the vehicle. However, with the way driver averaging works, this could make an impact in reducing the cost of your insurance by a great deal.

Setting up your insurance in this manner does have some limitations. Your child would be limited to their vehicle, and would not be able to drive the other vehicles in the household. If you intend to save the most amount of money on your insurance, the vehicle you would want to place them in would be the oldest and least valuable vehicle you have, with the biggest savings occurring if their policy covered liability only. As they are above the age of 18, own their vehicle, and have their insurance, if the damage they caused exceeded the amount of coverage they had on their policy, the injured party could not come after you and your estate.

Even if your child resides in your household, and their personal property and liability would likely be covered under your homeowners or renters insurance, it is always wise to consider setting them up with their renters insurance and personal umbrella policy. This would afford them far more protection in the event they caused a loss, helping to protect their finances as well, while also shielding your home insurance for any liability they could cause in that manner. A renters insurance and umbrella policy are typically very inexpensive, and the cost for those policies is often completely offset by the discount you would receive on the auto policy for bundling those policies together.

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Kelsey Harris

Associate Writer

Kelsey joined the Wavez staff in June 2019 and has been impressing readers ever since. She graduated from USC with a bachelor's degree in English and specializes in our Health and Finance categories.