Is There Any Disadvantage of Putting Your Car Insurance Under Your Parent's Name?

Getting your first new car is an exciting experience, but you must tame your emotions a bit to ensure that you can get the car properly registered and insured. If you're a young person, it is tempting to simply choose to put your car on your parents' policy, but first understand any potential disadvantages of this arrangement.

Insurance Requirements

When you first purchase a vehicle, you must provide proof of insurance in the majority of states. A car insurance policy protects you, other people, your vehicle and the property of others. When you purchase a car as a teenager or young person and you still live under your parents' authority, you may have the option of maintaining coverage under your parents' auto policy. This is often cheaper for you than trying to get your own policy.

Higher Risk for Parents

One disadvantage of going on your parents' auto policy is that you may put them in a higher risk category. Teens and young drivers are more prone to incidents while driving due to lack of experience. Also, issues like texting and talking on cell phones while driving are a major concern of insurers. If an insurer allows you to insure your car under your parents' policy and you then experience an incident, that could drive up your parents' rates dramatically.

Parent Listed as Owner

In some cases you may have to list one or both of your parents as the owner of the vehicle in order to use your parents' insurance policy. In this case your parent partially or wholly owns the car --- it is called having an "insurable interest" in the vehicle. If a parent is the titled owner, he decides what happens to the car. You do not have rights over the vehicle, just permission to drive it from your parent. The insurer lists you as a driver on the policy.

Getting Your Own Policy

You're more likely to get approved for your own separate policy if you have a clear driving record. Also, as a young person it helps if you take a defensive driving course (and observe what you learn). The course could eliminate points from your license and lower your rates. It is crucial to maintain the policy in good standing going forward.