Student debt, delayed marriage and a weak economy are among the reasons why more Millennials are moving back in with their parents. Returning home can result in a good amount of savings for boomerang kids if parents are paying the bills, though there’s one bill the 20- and 30-somethings may want to continue paying: their car insurance.
Paying for their own car insurance will not only make it easier and cheaper for their parents, but having their own policy will protect everyone in the household if their parents exclude them from their coverage. Continuing with an existing insurance policy will also allow the young driver to possibly get a discount from the carrier for being a long-term customer.
Not having auto insurance can become confusing for people who have a driver’s license and move back home. Record numbers of Millennials are moving back home, according to Census Bureau data cited by Slate. In 2014 nearly 15 percent of 25- to 34-year-olds lived with their parents.
Their savings can include an auto insurance premium, though their parents would likely see their auto insurance costs rise by adding another household member who can drive the family’s cars.
“You are not automatically part of your parents’ policy if you move back home,” says Lisa Radov, owner of Triumph Insurance Agency. “All drivers living in the household must be listed on the auto policy.”
Parents will need to tell their insurer that their children have moved back home, and then list them on their policy. Even if the children who are of driving age don’t plan to drive a parent’s car, the assumption by insurers is that they will because they have access to the cars as a member of the household.
A household driver doesn’t have to have a driver’s license to be considered a driver on a parent’s policy. They can be anyone who has the knowledge and ability to drive, and can include someone whose license is expired, suspended or revoked. A recent immigrant, who has never had a U.S. license to drive, can also be considered a household driver.
The idea behind this logic is that everyone in a household has access to the family vehicles. A non-driver might use a family car in an emergency, for example.
If they get into an accident and were not reported and added to the policy, the insurer will likely cover the accident but may drop the coverage soon after or when the policy expires. Or it could bill for the extra coverage and increase the premium.
“The company will not automatically know if you move back,” Radov says, “but if you have an accident with a parent’s car, they will find out that you are a resident who might have access to the cars and charge you back from the time that you moved home.”
Another option: Exclusion
Parents could tell their insurer to exclude their returning child from their policy, meaning an auto accident by the child wouldn’t be covered. It’s a way of certifying that a child won’t drive a parent’s car. Not all insurance companies or states allow an uninsured driver to be excluded, however.
According to Radov, the kids have to have some type of insurance or the parents’ insurance company will not exclude. The reason, she says, is that without other insurance for the kid, the parents’ company will get stuck covering an accident.
If the excluded driver doesn’t have their own insurance — and sometimes even if they do — and the parent lets them drive their car, the parent could be liable for all damages and injuries if their child has an accident.
An excluded driver would have no coverage at all in most states. But some states require limited liability coverage for excluded drivers, and adding an excluded driver may increase the premium to cover the risk.
The exclusion will likely require signing a document stating that the parent understands there is no coverage for their child.
Even if a child is excluded, the parents’ insurance company may require proof that the child is covered by another auto insurance company.
One reason for this is because unlisted household members often drive family vehicles anyway and cause accidents that result in insurance claims that insurers must defend against.
That’s why insurers will often require anyone of driving age living in a house to be listed on the parents’ policy and that the extra coverage cost more. The insurer is taking on extra risk if a child moves back home, and wants to be paid for the actual risk they’re incurring.
A big reason for having insurance is to cover yourself from a catastrophe, such as being sued in court for damages caused by your uninsured son who drove your car. That may be enough of a reason to add them to your auto insurance policy — and to get them to move out on their own.