Are you a young adult in your 20s still on your parents’ insurance policy? Many young adults often find comfort in staying on their parents’ insurance, but what they might not realize is that this decision can have a significant impact on their financial future. In this blog post, we’ll explore the concept of insurance scores, debunk the “age 25 myth,” and discuss how delaying the transition to your own insurance policy can lead to higher premiums. We’ll also provide valuable insights on what affects your insurance rate and how to improve your insurance score, along with the potential benefits of using telematics and driving score apps.
Do You Know What an Insurance Score Is?
An insurance score is a numerical rating or score used by insurance companies to assess the risk associated with an individual or entity when providing insurance coverage.
Factors of an Insurance Score
- Credit History
- Driving Record
- Claim History
- Insurance History
- Other Factors
The Age 25 Cheaper Insurance Myth…
There is been this rumor for years to wait to come off your parent’s policy till you’re 25 and you will get a better insurance rate….. that is a myth!
Insurance works the same way credit works. If you don’t have established credit in your name, you will not have a good credit score.
The same thing happens in insurance. If you don’t have any insurance in your name, you won’t have a good insurance score. This means you will pay a higher rate.
What Else Affects Your Rate?
Things that affect your insurance rate are clean history, such as accidents, or even comprehensive filings like windshield claims, roadside claims, and rental claims all of these affect your insurance similarly to accident claims.
Shopping your insurance frequently and bouncing around from carrier to carrier also affects your insurance rate, and it’s not good practice.
You should never move insurance carriers more than once a year, and even that is now getting frowned upon in the current insurance rate climate. Also, the sooner you can get off your parent’s policy the faster you can improve your insurance score. Other factors are listed below:
- Location: Where you live plays a significant role in your premium. Urban areas generally have higher premiums due to increased traffic and accident rates.
- Driving Record: Maintaining a clean driving record is one of the most effective ways to keep your premiums low. Traffic violations and accidents can cause your rates to skyrocket.
- Type of Vehicle: The make and model of your car, as well as its safety features, impact your premium.
- Coverage Levels: The amount of coverage you choose also affects your premium. Higher coverage levels result in higher premiums.
Why Staying on Your Parent’s Policy is Hurting You
While staying on your parents’ insurance policy might seem like a cost-effective choice, it can have consequences. When you delay getting your own insurance policy, you deny yourself the opportunity to develop your insurance score. As a result, when the time comes to transition to your own policy, you may face significantly higher premiums.
The Consequences of Delaying Your Own Policy
Let’s put this into perspective with an example. Imagine you stay on your parents’ policy until you’re 30 years old. By doing so, you’ve missed out on ten years of building your insurance score. When you finally get your own policy, the lack of an established score can lead to substantially higher premiums. The longer you wait, the higher the rate you’ll pay.
How to Improve Your Insurance Score
So, how can you improve your insurance score as a young adult? Here are some tips:
- Get with a preferred carrier
- Hold proper insurance limits (not state minimal)
- Not shopping your insurance frequently
- Knowing when to make a claim
- Taking advantage of multi-insurance discounts
- Managing your finances responsible and paying bills on time
- Maintain a clean driving record
Telematics and Driving Score Apps
Innovative tools like telematics and driving score apps offer a new way to save on insurance premiums. These apps monitor your driving habits, rewarding safe driving with discounts. By using telematics, you can proactively influence your insurance score and reduce your premiums.
Transitioning to Your Own Policy
When is the right time to transition to your own insurance policy? It’s essential to plan this carefully. As you approach your early to mid-20s and gain more driving experience, consider shopping for your insurance policy with a preferred carrier. Do not make the mistake of going to a captive insurance company. Look for an agency of brokers that can shop multiple carriers. By doing this, you’ll be better prepared to secure affordable coverage when you’re ready to make the switch.
In the world of insurance, waiting can be costly. Don’t fall victim to the “age 25 myth” or delay taking control of your insurance destiny. As a young adult, be proactive in building a strong insurance score, understanding the factors affecting your insurance rate, and exploring modern tools like telematics to save on premiums. The longer you wait, the higher the rate, so start your journey to responsible and cost-effective insurance practices today.
Need Help Making the Switch?
Ready to take control of your autonomy? Consider discussing your options with an E3 Insurance Advisory Group engineer. We’ll research different insurance providers, explore telematics and driving score apps, and leave you educated on the complexities of insurance as well as how and when to use it. Fill out the form below to get started today or call us directly at 636.542.8966