Why parents of university age drivers should review auto policies

If your clients have kids heading to university, and those kids have driving licences, now’s the time to review auto policies.

Many university students take on part time jobs to cover their expenses, and those jobs may require them to drive, either for work or to-and-from the workplace, notes a commentary from aggregator Rates.ca.

Plus, living away from home can add new risks – like driving a car borrowed from a friend or driving in an unfamiliar city.

“For young drivers, insurance can be one of the largest expenses they face each year,” says Daniel Ivans, a licensed insurance broker who provides commentary for Rates.ca.
But there are ways to keep premiums manageable and not make error that can hike premiums or lead to claims denials, he adds.

“Making informed coverage choices and steering clear of common mistakes can be the difference between keeping premiums affordable and dealing with a financial headache.” 

Here are some pointers Ivans says are worth bringing up with parents looking manage costs while maintaining solid coverage for their kids: 

• Find discounts – Look into discounts for students who’ve had driver training and keep their grades up. Usage-based insurance offerings are also worth a look because they may offer better premiums to safer drivers. Each insurer’s offering are different, and brokers can help clients shop their options for the best discounts and rates.

• Standalone policies aren’t always right – For many students, it can be more affordable to stay on a parent’s policy, rather than starting a separate, standalone policy. Switching too early can lead to much higher rates for younger drivers. But clients should shop thoroughly because some specific circumstances and discounts can make the change worthwhile.

• Don’t fudge kilometrage numbers – Insurers must be told if students will use their cars to commute to campus or are taking a vehicle with them to drive regularly in another city or town. Parents should be discouraged from remaining named on the policy as the vehicle’s sole operator. Yes, it can be cheaper but it can also lead to claims denial. 

• Watch coverage gaps for rented or borrowed cars – An owner’s policy is usually first to respond when a driver using a borrowed car gets into an accident. That can be problematic because limits and exclusions can leave coverage gaps, especially if the borrower drives the car regularly without being listed on the policy. Plus, not all standard policies include rental car coverage, or might require an optional endorsement or credit card protection, which comes with restrictions. 
• Keep kilometrage data up to date – Parents or students should tell their broker or insurer about any changes to their driving habits, like commuting less or driving only on weekends. This can sometimes lower premiums. 

Phil Porado

Phil, an award-winning journalist with over 30 years of experience in financial topics, has been managing editor of Canadian Underwriter for more than three years.