Driving may be a rite of passage for teenagers, but for parents, having a teenage driver can be stressful and expensive. Your child will need auto insurance coverage as soon as they receive their driver’s license. Here are some important considerations.
Determine Whether to Add Your Child to Your Policy or Purchase a Separate Policy
- Check with your insurer to see how your premiums may be affected. Expect that they could rise dramatically; however, savings may be found through multi-vehicle and good student discounts.
- If your child is driving an “old beater” that doesn’t require comprehensive or collision coverage, a separate policy, in limited instances, may save you money.
- Discuss your options with your insurance agent.
Consider Your Teen Driver’s Coverage Choices
- Most personal auto policies won’t cover a driver transporting goods or services in exchange for a wage. So, if your teen is planning on becoming a pizza delivery driver, for example, contact your insurance agent to determine if additional coverage is needed.
Find Ways to Save Money
- Consider vehicles with high safety ratings over sportier, more-expensive cars.
- Think about raising your policy’s deductibles.
- Reassess your need for collision or comprehensive coverage.
- Ask about “occasional” or “pleasure only” discounts, which may apply to children away at school.
- Explore usage-based insurance, which involves installing a device in the vehicle that monitors driving behavior and rewards good driving. It’s also a way to keep tabs on your teen’s driving.
- Have your teen complete a driver’s education course.
Despite the overwhelming research documenting the health and behavioral consequences of underage drinking, some parents believe that allowing minors to drink under their supervision may lead to more responsible drinking in their adult years. Other parents believe that allowing minors to drink in the home is a better alternative to drinking outside the home.
Regardless of your parental approach to your teen children and drinking, when teens drink at home, you may be exposed to substantial civil liability. Even if it occurred while you were away or without your consent.1
Social Host Laws
At least 43 states have laws that make social hosts civilly liable for injuries or damages caused by underage drinkers, and many states have criminal penalties for adults who host or permit parties with underage drinking in the their homes or in premises under their control.2
State laws vary, so the precise circumstances under which you may be held liable will depend upon the state in which you live.
The liability to which you may be subject may include medical bills, property damage, and pain and suffering.
The most effective way to avoid this risk is not to allow any alcohol at teen parties that may be hosted in your home. Since you may be liable for teen drinking in your home even when it occurs without your consent (e.g., while you’re on a well-deserved weekend getaway), make sure you have adequate personal liability coverage.
As a homeowner, are you responsible for the damage caused by a tree on your property that hits your neighbor’s home or other insured structure, such as a garage or shed?
In most cases, the answer is “No.”
When such damage occurs to your neighbors’ home due to forces outside your control, such as weather events, your neighbors may have to file a claim with their insurer to receive a reimbursement for the damage a downed tree or branches cause.
There is one exception, however.
If it is determined that the tree damage stems from your negligence (for example, dead limbs that you refused to cut down), then the neighbors’ insurer may come after you to recover their loss—a process called subrogation.¹
You may want to check your policy or speak to your insurance agent to ascertain if your homeowners policy covers your liability in cases of negligence.
When Neighbors Sue
Some neighbors may seek to bring legal action against you, though often that is unnecessary.
First, determine what municipal laws are in place to cover such instances. Generally speaking, you are not responsible unless you knew, or should have known, about the danger. Proving what you knew or should have known can be difficult and costly in a court of law. It typically benefits both parties to arrive at a compromise that avoids an expensive legal process.
Divorce can be an emotionally and financially challenging life event. In the face of the many possible adjustments divorce entails, making changes to insurance coverage may be overlooked.
Here’s a look at each type of coverage:
If there is a change in auto ownership, you may need to obtain car insurance coverage to coincide with that change. You also may want to think about removing your former spouse from a policy to protect yourself against potential liability and ensure that his or her name does not appear on any claim check. Don’t forget to notify the insurance company of any address change.
A divorce may mean a new place of residence for one or both spouses. Consider purchasing renter’s insurance if you are moving into a new apartment. If you are staying in your present home, you may want to remove your ex-spouse’s name from the policy and consider changes to any property coverage if, for instance, your former spouse is taking jewelry or other items of value from the premises.
Life insurance is often purchased to cover financial obligations that may occur when a spouse passes away. Life insurance policies may be an element of your divorce agreement. If possible, consider buying a policy on a former spouse’s life if he or she is providing alimony or child support.1
If you do retain a pre-existing policy, be sure to review and amend the beneficiary so that it reflects your current wishes.
A disability may have an adverse impact on the ability of a former spouse to pay alimony or child support. As such, you may want to include the maintenance of such a policy in the divorce agreement.2
If you or your children are covered under your former spouse’s employer group plan, you may want to contact the employer to continue coverage under COBRA (Consolidated Omnibus Budget Reconciliation Act). If you have an individual policy, you may want to consider adding your children to the policy. You may not want to duplicate coverage for your children.
One of the attractions of leasing a car is that it generally requires a much smaller upfront outlay of cash compared to what purchasing a car might require.
This preference to minimize an upfront cash payment may mean that some individuals may also roll other associated costs into the lease payment, including the capital-reduction amount (or down payment).
While the predictability of a known payment amount for a set period of time may be convenient, rolling up such costs into the lease payment may create a financial risk in the event that you experience a total loss from an accident or similar misfortune. In some cases, what you owe may exceed the value of the car and the amount of the reimbursement you receive.1
You can protect yourself against this potential risk by buying gap insurance, which is designed to cover the difference between what conventional auto insurance covers and what you owe at the time of the loss.
Gap insurance may be added to your existing auto policy or purchased separately.
How Much Gap Insurance Do I Need?
The gap between the value of the car and what you may owe is predicated on a number of variables, such as the depreciation of the car, the number of payments made, and even the nature of the deal you negotiated. As you might have guessed, the relationship between these variables means that the amount of gap insurance you may need can vary over time.
To obtain adequate coverage, you should contact your insurance agent and work with him or her to determine the necessary coverage amount.