Is Your College Student Paying Too Much For Car Insurance?
The average car insurance premium for a college student is between $1,500 and $4,500 per year. These premiums are high because traditional college students fall into an age category considered more likely to drive recklessly. That means they are going to be a greater risk to the insurance company. However, there are a variety of ways to cut down those costs.
Students – both high school and college students – can qualify for discounts based on their grade point average. The discount amount and qualifying GPA differ from insurer to insurer but if a student is earning at least a 3.0 most companies will reduce the premiums. The idea, of course, is that students who do well in school will also be more responsible on the roads thus their risk of causing or being involved in an accident is lower.
College bound students may also be eligible for discounts simply because they have to leave their cars behind. Many universities do not allow freshmen to have cars at school with them, usually due to limited parking availability. Parents or students may be tempted to simply cancel the coverage since the vehicle will not be driven. However that can cost the student later – not continuing coverage consistently can be a factor leading to higher premiums.
Instead of outright cancellation, some insurers will suspend coverage for the period the vehicle is not being used or will offer a discount because the car is accumulating very few miles. Students who do live on campus and have their vehicles with them may still qualify for the latter discount.
For students who are purchasing a car for college, insurance premiums can vary depending on the type purchased. Used cars are typically a better value in terms of premiums than new cars, especially for young drivers.
Student loans can also affect car insurance premiums. Because so many insurance companies are now using credit scores as factors in determining premiums, students carrying a significant amount of loan debt can see their scores reduced and their premiums increased. The problem can be exacerbated because so many college students also start taking out credit cards during this time. According to a 2009 student, over 80% of undergraduates had at least one credit card with around half of those students having more than four cards. The same study found that only one-fourth of students paid their balances off in full every month.
Either the student or the parents need to let the insurance company know about changes that may affect the coverage. For example, if a student is taking the car to an out-of-state college then that might cause a problem with the coverage. Those potential issues need to be ironed out before the coverage is needed, such as after the student causes an expensive accident.
Working closely with an insurance company ensures the insured will get the discounts he or she deserves and will have the appropriate coverage needed.