Are you a divorced parent trying to figure out how to get your teen car insurance? We’ll help you understand the basics and make sure your kid has the coverage they need.
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Listen, we know that if you’re reading this blog post, you have a million other things that need your attention. Even though every divorce is different, we can all probably agree that insurance is the last thing you want to think about at this very stressful and emotionally draining time. Â.
Unfortunately, itâs something that deserves your attention â especially if you have children that need car coverage. Different states have different laws regarding custody agreements, financial arrangements, and living environments. All of these things may affect who pays for your kids’ car insurance. Â.
Getting a divorce can raise many complicated questions when it comes to finances and obligations, especially when there are children involved. One common area of confusion is who is responsible for paying for car insurance for teen drivers after a divorce.
How Custody Arrangements Affect Car Insurance Responsibilities
In most cases, the parent who has primary physical custody of the child is responsible for paying for their car insurance This is the parent that the child lives with most of the time. The non-custodial parent, or the parent with less custody time, is typically not required to pay for car insurance for the teen
However, there are some exceptions and things to consider:
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If the divorce decree or custody agreement specifically states that the non-custodial parent will pay for auto insurance, they may be required to cover all or part of the costs. This should be reviewed closely.
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Some states have laws requiring both parents to financially support their children. In these cases, the non-custodial parent may be mandated to pay a portion of car insurance even without a stipulation in the custody agreement.
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If the child is splitting time more evenly between both parents, some states may require both parents to pay a share of expenses like car insurance.
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The non-custodial parent’s insurance may be required to cover the child while driving one of their vehicles. Most insurance follows the car, not the driver.
Tips for Managing Car Insurance Costs After a Divorce
Paying for a teen’s car insurance can be an unwelcome expense, especially for divorced parents struggling financially. Here are some tips custodial parents can consider:
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Shop around. Get quotes from multiple insurance companies to find the best rate. Rates can vary greatly, so taking the time to compare can yield big savings.
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Choose a safe, modest vehicle. Opting for an older, less expensive used car and avoiding luxury vehicles or sports cars can keep insurance costs down. Also choose a car with safety features.
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Ask about discounts. Many insurers offer discounts for good grades, completing driver’s education courses, maintaining low mileage, having multiple policies with the same provider and more.
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Increase deductibles. Choosing higher deductibles, like $500 or $1000, can substantially lower premiums. Just be sure you have savings to cover the out-of-pocket costs in a crash.
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Drop unnecessary coverage. If the teen has an old car, dropping comprehensive and collision coverage can save a lot of money, though it increases risk.
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Enroll your teen in usage-based programs. These programs use devices to track driving habits and offer discounted rates for safe driving.
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Have the teen share costs. Requiring your teen to contribute to the insurance payments from a part-time job teaches financial responsibility.
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Ask the other parent to contribute. Even if they are not required to, the other parent may be willing to pay for part of the insurance to reduce costs for you.
When the Non-Custodial Parent Wants to Provide the Car
Sometimes the non-custodial parent may offer to provide a car for the teen to drive. This can present some issues:
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The custodial parent remains responsible for insurance, even if they aren’t providing the car. The insurer follows the driver, not the vehicle.
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Insurance will likely be more expensive if the non-custodial parent purchases an expensive car. The premium is based on the car’s value.
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There could be disagreements over safety issues, liability, permission to drive, and more if the non-custodial parent owns the car.
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The non-custodial parent would need to add the teen to their policy, increasing their premiums. They may expect the custodial parent to cover this added cost.
To avoid problems, any agreements about providing a car should be made jointly with clear communication. Consult an attorney if needed to ensure a fair arrangement.
Impact on Insurance Rates After Adding a Teen Driver
Insuring a teen driver inevitably results in much higher car insurance costs. Premiums increase an average of 82% when adding a 16-year-old to a policy according to insurance data. Rates start dropping around age 18 if the teen maintains a clean driving record.
Here are some average national premium increases by age when adding a teen to a policy:
- 16 years old – 82% increase
- 17 years old – 58% increase
- 18 years old – 47% increase
- 19 years old – 23% increase
Rates are higher for boys than girls until the early 20s. Other factors like type of car and location also impact rates. Teen crashes and violations can raise premiums significantly.
The custodial parent should budget for large premium increases when getting a teen driver insured. Shopping around for the best rate and utilizing discounts can help offset the costs.
Who Can Claim the Teen as a Dependent for Tax Purposes?
Claiming a child as a dependent on taxes can provide certain tax credits and deductions, including a credit for Other Dependents of up to $500. The IRS has guidelines determining which divorced parent can claim a child.
The custodial parent has the right to claim the child if certain criteria are met:
- The child lived with the custodial parent for more than half the year.
- The custodial parent provided at least half of the child’s financial support.
- The child is under 19 years old or a full time student under 24 years old.
The custodial parent can choose to release the exemption to the non-custodial parent by signing IRS Form 8332. This may allow the non-custodial parent to claim the child tax credit and dependent care credit.
Consult a tax professional to ensure proper claiming of exemptions for children of divorced parents on tax returns. Follow IRS guidelines to avoid audits or penalties.
Tax Benefits for Teen Drivers
If the custodial parent claims the teen as a dependent, they may qualify for some tax benefits related to driving expenses:
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Child and Dependent Care Credit – If the teen driver needed supervised care while the parent(s) worked, expenses for care, such as transportation costs, may qualify for a credit up to 35% of costs (max $3,000 for one child or $6,000 for two or more).
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Medical Expense Deduction – If medical expenses, including those related to a car accident, exceed 7.5% of adjusted gross income, the excess can be deducted.
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Earned Income Tax Credit – If a teen driver works part-time and meets income limits, this credit of up to $6,557 may apply if the parent claims them.
Consult IRS Publication 503 for details on claiming tax benefits related to children and dependents.
Teaching Financial Responsibility with Car Insurance
Adding a teen driver provides a prime opportunity to teach financial lessons and responsibility. Consider having the teen contribute in the following ways:
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Pay the difference in premium caused by adding them to the policy.
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Pay any rise in premiums due to tickets or accidents.
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Contribute gas money each month.
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Save up to pay the deductible amount in case of a collision.
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Split maintenance costs like oil changes, tire rotations and car washes.
Also set rules and boundaries for driving privileges, safety protocols, grades, driving record, etc. Making smart choices will keep costs down.
Alternatives if Unable to Afford Car Insurance
For low income families, insuring a teen driver may be entirely unaffordable. Some options in this situation include:
- Delay getting a license until the teen can contribute more income.
- Have the teen only drive a parent’s insured car occasionally.
- See if the other parent or family members can contribute funds.
- Use public transportation when possible.
- Seek financial assistance programs or discounts through insurers.
- Consider state insurance pools as a last resort.
Prioritizing needs may mean postponing owning a car until after high school or college. The most important goal is keeping teens safe on the roads.
Key Takeaways
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The custodial parent generally pays for teen car insurance, but the non-custodial parent may also be obligated in some cases.
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Adding a teen will cause a steep rise in insurance rates, often around 80% higher.
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The custodial parent can typically claim tax benefits related to the teen driver.
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Setting rules and requiring financial contributions teaches responsibility.
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If unable to afford insurance, delay getting a license or seek alternative transportation options.
Divorced parents should communicate to decide car insurance responsibilities for their teen driver. With planning, this major expense can be managed smoothly. Most importantly, ensure your child is properly insured when driving for their safety and future.
Factors to Consider When Providing Car Insurance for Your Child
You and your ex-spouse will need to decide who will be the main policyholder for the child if you share custody. It’s not easy to have this kind of conversation, but you and your ex will need to look at your separate finances and living situations, as well as the specifics of your divorce agreement, in order to make that choice. Here are some factors to consider.
Unsurprisingly, legality is a common thread in these situations. Custody agreements can be very loose or very strict, but no matter what you and your ex decide, it will affect more than just the time your child spends with you. Â.
It stands to reason that the parent who has primary custody should also be the main policyholder for the insurance. However, this isnât necessarily a hard and fast rule. Factors like where the child attends school and who the custodial parent is matter. Â.
On the other hand, you can share a joint policy if you have a fifty-fifty custodial agreement. That being said, how you both choose to divy up payments may require another awkward conversation. Â.
The most important thing is to achieve clarity vis-a-vis your specific legal situation. If you and your former spouse have not resolved questions around child custody or child support, this will affect decisions around insurance.
The first thing that needs to be done when parents share custody is to decide who will be the main policyholder for the teen driver. Several factors may help to determine your choice including:
- Which parentâs insurance offers the best coverageÂ
- Who the child spends more time with
- Where the childâs school is located
- Who paid for the childâs carÂ
By answering these and other questions, you can get a better idea of what’s going on and come up with a good solution.
In an ideal world, the parent with the best insurance coverage would be the primary policyholder. However, this isn’t always possible, especially if you share custody. Joint policies are like joint custody in that they allow both parents to have the same auto insurance policy that covers their child, so both parents are equally responsible. With separate insurance plans, each parent has an individual policy that covers the teenage driver. Â Â.
Your child may need to be covered by both parents if they live with both of you and the child spends equal amounts of time with each parent. After that, it will be up to you parents to choose whether to get a joint policy or add the child to your own policies. There are times when a joint policy is cheaper, so you should talk to your provider about all of your options.
And this brings us to our next thorny topic: money. Money is always messy, and money after a divorce particularly so. Each parent will be responsible for their own premiums whether you choose a primary policyholder or use separate policies. You can make payment plans with your auto insurance company directly, so you won’t have to worry about dividing anything. Â.
If youâve opted for a joint policy, youâll need to determine how you split payments â especially since car insurance costs can add up. Consider the following when making your decision:
- How your child drives: Let’s say one parent takes the kid to school and the other lends them a car. It makes sense that the parent who lets the child drive should have to pay more for the insurance.
- Your child’s car: Let’s say a parent bought their kid a nice new car with higher insurance rates. That parent might make sense to pay the premium. Â .
- 50/50 rule: If your divorce agreement says that each parent will pay half of the child support, it might be best to stick to that rule. Â .
If you are getting a divorce, you might want to write down your final decision on how to split the money. Â.
As you look into who is covering what, you should also think about any available savings opportunities. Any little bit helps! Here are a few options that may be available to you:Â Â.
- More Than One Policy: If you have more than one policy with some insurers, you can get a discount. If one parent has more than one policy with a certain company, you might want to get your child’s car insurance through that company. Â .
- Multiple Vehicles: Sometimes it’s cheaper to add a car to an existing policy than to get a whole new policy. Â .
- An extra driver may be cheaper if you keep everyone on the same policy. This is because deals on extra drivers may be available. Â .
To choose the safest and least expensive option, you need to know about your current car insurance, your ex’s policy, and the other choices you have. Car insurance providers typically charge more for young drivers, so be extra vigilant when comparing rates and policies. Â.
Understanding Car Insurance for Children of Divorced Parents
Remember that your child needs insurance even if they don’t have their own car. Your child needs insurance every time they get behind the wheel of any car, to protect themselves and other people. Â.
Things You Should Know As A Non-Custodial Parent
FAQ
How does car insurance work if your parents are divorced?
Do I have to live with my dad to be on his car insurance?
Can I insure my son’s car if he doesn’t live with me?
What happens if I’m not on my parents car insurance?
Who pays for car insurance for a child?
Usually, but not always, this is the parent receiving the child support. Some companies even require parents sharing joint custody to cover the child on both policies. The parent required to list the child on their insurance may not always be the same parent in charge of paying for the car insurance.
Should a child be added to a parent’s car insurance policy?
Add a child to a parent’s car insurance policy once the insurer requires it, whether when the minor has a permit or has a driver’s license. The parent that the child visits should inform their insurer of the licensed child that lives in a different household to see if they are required to add the child as a driver, occasional driver or not.
Do I have to list my child on my car insurance?
Car insurance companies will generally require a parent to list their child on their insurance policy if that child is a licensed driver living in their home. In that case, the burden can often fall on the custodial parent (the parent with the most custody time).
Do both parents need to insure a minor driver?
Whether both parents need to insure a minor driver on their car insurance policies depends upon the living situation and who has custody of the child. It also depends on the guidelines of the parent’s insurance companies whether the minor must be listed on each car insurance policy or with just one parent’s policy.