It’s that time of year again. Graduation season is upon us and within the month, approximately 1.8 million students will receive their diplomas and move into the working world as young professionals. The transition will involve a great deal of change as some graduates move back home and others across the country—all the while gaining responsibility and independence.
With that freedom, often comes the severing of parental financial support. Perhaps your graduate has already moved off of the phone plan, and the next step may be an individual car insurance policy. There’s a lot of conflicting information out there about auto insurance and it’s easy to get lost in it all. Here are some tips on best practices and rate expectations to make the transition easier for both graduates and parents.
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What Can Graduates Expect?
Years of hard work, late night study sessions and countless papers have all paid off. Congratulations on the diploma! Quite an accomplishment. Here’s what to look for as you move onto your own car insurance plan, and how to find the right coverage for you.
Get a few quotes: Rate expectations can be difficult to determine when you’ve never shopped for car insurance before. All drivers have their own personal driving situations that determine the cost of auto insurance. This is typically based on age, location, driving history, vehicle model, and more. Auto insurance prices vary, so it is best practice to shop around to compare prices.
Consider what you need: Know your state requirements, as most states enforce a minimum level of liability insurance. Once you have the mandated level of coverage, additional insurance is up to you. You may decide to purchase uninsured motorist coverage, which protects you against other drivers who don’t have insurance, or you can even opt for medical coverage.
If you have an older vehicle: Consider your coverage options. Drivers who own older vehicles may be over-insuring their vehicles, in the form of collision or comprehensive coverage. The first covers damages to your car in the event of a collision, while the second covers damages caused by other forces such as theft, flooding, fires and vandalism. An insurer will either pay for repairs after you pay your deductible, or they will reimburse you with the car’s perceived worth (if the cost of repairs outweighs the perceived car value). If your vehicle is an older, hand-me-down family car, it may be worth it to pass on these types of coverage and put those savings towards a future vehicle.
Understand your deductible: A deductible is the amount of money you will have to pay for repairs or damages before your insurance kicks in. Raising your deductible will make your car insurance more affordable. However, be aware of what this means and carefully consider what is right for you. Raising your deductible from $500 to $1000 may make your premium price cheaper, but it also means that you’d have to pay $1000 out of pocket in the case of an accident. That lump sum may not be possible for all recent graduates starting out.
If you’re purchasing a new car: Look for the safety features you can afford. Not only will rearview cameras and blind-spot monitors help you drive safer, they can also get you a discount on auto insurance.
Don’t say goodbye to college: Graduates can ask their alma mater directly about alumni car insurance discounts. Many universities have ties with specific insurers and it can save you money to find out more. You should always ask your insurer about potential discounts that you may be eligible for. Even filling out a paperless, digital auto insurance application may help you save.
What Can Parents Expect?
Parents, congratulations to you, too! You’ve made it here as well and now that your graduate is on their way out of the house, and onto their own coverage plan, you’ll be able to receive some car insurance benefits.
If you’re dropping your child from your insurance plan…
- Expect a rate decrease: Regardless of how safe a driver your graduate is, chances are, they still made your premium rate jump up on their 16th birthday. Now is the time when you finally get to see a lower cost again. By removing a driver from your insurance plan, the cost should decrease significantly—as drivers under the age of 25 are typically much more costly to insure.
- Consider listing your graduate as an occasional driver: Does your graduate still share a home address with you? Will they be driving your vehicle once in awhile or have they moved across the country? Most auto insurance plans allow other drivers to operate your vehicle under your coverage, as long as it’s on rare occasions. This is known as “permissible driver coverage”. However, it is best to speak to your insurer to see what is currently covered under your plan. If your graduate is living at home, your carrier may require you to keep your child on your insurance policy as an occasional driver.
- Add on discounts: If you’re already changing up your car insurance plan, then it’s a great time to consider shopping around or to ask for additional discounts. For example, if you’re retired, you may receive a discount. There may also be rate reductions for car safety features, electronic payments and auto club organizations. Ask your insurer to find out whether you’re eligible to save more today.
- Shop around: Perhaps, it’s been 4 or 6 years since you’ve last shopped for car insurance. Before simply renewing with your current auto insurer, consider shopping around to find the coverage that is best for you. You’ll likely be able to find cheaper rates by comparing prices, instead of remaining loyal.