To further celebrate the beginning of the school season (which I secretly celebrate not being a part of every year now), I have continued the discussion on college student auto insurance
. Part two focuses on college student with a vehicle at school, and the possible coverage gaps that can hurt both the college student and their parents.
Car at School
If/when a student has a car at school, there are two possibilities for auto insurance: add the car to the parent’s policy, or have the student get their own policy.
If the vehicle is added to the parent’s policy, the coverage from the parent’s policy would apply. The main concerns at that point would be rating factors, which include: multi-car discount, possible good student discount, principal youthful operator on vehicle, and garaging address for the vehicle.
The major coverage gaps and problems begin when the student has their own personal auto policy for their vehicle while at college.
Young driver’s starting their first auto policy tends to pick the least coverage available for the lowest price. Here in Indiana, the state minimum levels are $25,000 per person, $50,000 per accident bodily injury. If they are lucky, the policy will have some medical coverage and matching uninsured motorist and underinsured motorist. These are extremely low levels of coverage in case a bad accident happens.
If a student has these low levels of coverage and ends up in a large at fault accident with much higher medical costs for the other party, they would likely be sued for the difference. This can then go against their future wages, putting them in large amounts of debt for years to come. Being a college student with a guaranteed degree creates an assumption of decent wages after graduation, even if that hasn’t been the case for many recent graduates.
And because they are a college student, they likely still count as family on mom and dad’s auto insurance policy
. If the student is driving their own vehicle, the parent’s policy would likely not provide coverage. However, if they’re driving a friend’s vehicle without enough insurance, their insurance and their parent’s insurance could become involved.
Vehicle Jointly Titled with Student
The situation gets to be worse when a vehicle is jointly titled and on a student’s stand-alone policy. If the student has an at fault accident in the car, all owners will likely be held responsible (including mom and dad). The student again likely has low levels of coverage, and probably not enough to cover all damages.
The part that gets worse is the parent’s personal auto insurance policy would likely not cover this accident (leaving the financial burden directly on the parents). This would fall under a common exclusion because the vehicle would not be a covered auto listed on the parent’s policy, but it would be owned by them.
My best advice if you jointly title a vehicle with your child, keep it on your policy. This is the only good way to insure that the vehicle has good liability coverage and coverage does not cancel for non-payment of premium. It also saves you money in case of a large accident. While a cheap, low coverage policy may be tempting, it can cost far more in the long run.
Other members in household of driving age
Siblings provide another possible coverage gap when college students carry a separate auto insurance
policy. For example, if a younger sister visits the college student, drives the vehicle and is an at-fault accident, their only coverage is through the student’s auto policy. The reason this is a big problem is if the policy has low limits and the accident exceeds those limits. In this case, the parent’s policy would likely not cover the daughter because the vehicle is an owned auto not listed on the policy. Again, parents would have the financial hit out of pocket if they were sued. The same problem as discussed above.
Overall, I feel like my parents handled the situation the right way – including me and my car on their auto insurance policy when I went to college. This way I was protected both by the high limits of liability on their auto policy, protected from unexpected gaps in protection, and even protected by their umbrella policy.
My dad was particular about getting my grade card to keep the good student discount on the policy, so it helped with the financial burden. If the student needs to help with the cost, all policies do break down the six month or yearly cost of each vehicle.
Luckily, I didn’t have an accident while at college to test the bounds of coverage on their auto policy. But it makes me feel good I didn’t have to worry about a possible hit on my financial future or causing a problem for my parent’s financial well-being.
In case you missed it, don’t forget to read part one to learn about how driving a roommate’s car could be excluded from your auto insurance policy.
Photo: “Campus-8” by Tulane Public Relations. Unmodified. Flikr. CC BY 2.0.