There are many reasons why kids want to stay on their parents’ insurance plan for as long as possible: Parents tend to have better credit, live in a more favorable zip code and have a better insurance score; and all of these factors contribute to lower rates. However, the good times don’t always last.
Once you’ve reached a certain age, you can no longer receive the benefit of your parents’ coverage. This is most notable with health insurance under the Affordable Care Act where children can stay on a parent’s health insurance plan up until the age of 26. With other insurances, such as auto insurance where the length of coverage under a parent account is more vague, companies have a way of getting you off your parents’ plan eventually. For example, in the event that a claim is filed on account of the child or if there is a loss, the insurance company will make an underwriting request to properly represent the policy/household. This will often come down to writing the child out of the policy and on to their own.
Alas, the time will come where you can no longer be covered under your parents’ insurance plan and you’ll have to buy your own. *Dramatic Sigh* Now, how do you prepare for this feat of adulthood?
Things to Consider…
Let’s say you’re going out to buy a TV for the first time. You’ve worked, you’ve saved, and you’re ready to start watching Netflix on a screen that isn’t your laptop. Are you going to just buy the first TV you see at the lowest price, or are you going to do some research to make sure you’re getting the most bang for your buck? Unless you want to go back to the store in six months to replace your TV, you’re probably going to want to do some research and make sure that you’re getting the best deal and quality that you can.
The same should go for your insurance. You don’t want to grab the lowest price policy and get out of there; you should shop around and make sure that you are getting the right amount of coverage. If you just jump to the lowest price, you’re poorly representing yourself to insurance companies. This will keep you paying more for insurance for the rest of your life and will put you at a greater financial risk if you have to file a claim.
Sure, stepping out on your own will be a bit of shock. Being cushioned by your parents’ good credit score and insurance history kept your prices low. But, let’s face it, a young, single adult driver will inevitably look like more of a risk than a 50 year old, financially stable, suburban dwelling parent, leading to higher premiums.
Just because you don’t want to pay more, doesn’t mean you should settle for less coverage though. It is recommended to at least match the coverage your parents’ policy provided, assuming that they were at an adequate liability limit of at least 100/300. Don’t risk the financial independence that you’ve worked so hard to achieve by having insufficient insurance. Upping your coverage from a minimum limit to a more sufficient one will only cost you a few extra dollars per month. A small price to pay for greater protection.
When transitioning off of your parents’ insurance plan, remember to do your research and not settle for low limits because they look cheap and you don’t plan on filing a claim any time soon. What looks cheap now, can be incredibly expensive down the line when you unexpectedly have to file a claim and your parents aren’t there to bail you out. By getting an adequate policy now, you will help protect yourself and your family’s future.
Getting new coverage is one thing, understanding what you’re getting and why you’re getting it is another. Take the time to learn about different plans and contact an insurance professional to make sure your transition toward insurance independence is a smooth one.