deputy Kim just bought her first car. after a moment of excitement, she was shocked to receive a quote for car insurance. it was 1.8 million won. it was three times more than her father's premium (600,000 won), who has 20 years of accident-free driving experience. This is because first-time car insurance policyholders with little or no driving experience are subject to a "first-time premium".
that's when a friend gives her a sage tip. "You should put the car in 99:1 joint ownership with your dad, and put the insurance in his name."
this is how acaris jointly owned by two or more people. the co-owners are listed together on the car's registration, and the shares can be 1:99 or 50:50. but is it really a "trick"?
the bottom line is thatjoint ownership ofa caris a double-edged sword that can be medicine when used correctly, but poison when used incorrectly. today, we're going to break down how joint namescan save you money on your car insurance, as well as the pitfalls of using them incorrectly.
the secret to saving money on car insurance
can you get insurance with just a 1% share?
yes, you can. when it comes to car insurance, the most important thing is "who" is insured. according to the Motor Vehicle Management Act, only one of the joint owners is required to purchase compulsory insurance.the percentage of ownership is completely irrelevant.
this means that even if you own 99% of the car and your parents own 1%, you can still have 100% of the car insurance in their name.
why can joint names lower premiums?
the key is who you choose to be the 'named insured'. car insurance rates are based solely on the age, driving experience, and accident history of the "named insured" (the primary driver listed on the policy).
joint ownership ofa cargives you the ability to 'select' this named insured.
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child Sole Named (Traditional):
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named Insured: Child (age 26, first-time enrollee)
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estimated premium: $1.8 million
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parent-Child Joint (99:1):
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named Insured:Parent ( age 55, 20 years accident-free)
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estimated premium: 600,000 KRW
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the child is included as a driver under the 'Family Only' or 'Designated 1' rider
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the result is a significant reduction in premium from 1.8 million won to 600,000 won (slightly higher with the rider). that's the key principle ofsaving money on car insurancewith ajoint car insurance policy.
the pros and cons of jointly insuring your car
however, this strategy should be approached with extreme caution. Thepros and cons of jointly insuringacarare stark.
pro: Save on insurance and leverage your credit
the biggest advantage is the aforementioned insurance savings, which can dramatically lower the cost ofcar insurance,especiallyfor first-time drivers.
another advantage is "financing". if the car buyer's credit is poor and they can't get a financing line or the interest rate is high, they canco-own the car witha spouse or family member with good credit and use their credit to get a better deal.
downside 1: Missing out on a basic pension? The $40,000 "luxury car" trap
this is the first and most deadly trap. if the parent with the 1% share is a 'basic pension' recipient, they could be disqualified from receiving the pension.
"I got disqualified from the basic pension because I put a 1% joint title on my son's car."
this is a real-life example. the basic pension looks at income and property, and cars are included as property, especially if the car is classified as a "luxury car" with a value of more than 40 million won ($24,000), even if you only own 1% of the car, regardless of your share, you are considered to own the entire value of the car (100%).
in other words, even if your parents only have a 1% stake in a 41 million won car ($410,000), they could become the owner of a 41 million won luxury car and lose their basic pension - meaning theylose their monthly pension just to save on car insurance.
con 2: Bad credit? My car could be repossessed
the second pitfall is the "credit and property repossession" issue. a 1% share is technically "property". what happens if your parent (or sibling, or spouse), the 1% owner, doesn't pay their taxes, can't pay their debts, has bad credit, or goes through a personal bankruptcy?
creditors can "seize" that 1% share. if even 1% of the car is repossessed, I, as the 99% owner, can't sell or scrap the car at will. the worst thing that could happen is that my car becomes a "bummer" because it's tied up in the 1% share.
if you don't know 'this' when buying joint insurance, you'll be hit with a 'special surcharge' bomb!
there is one trap thatjoint drivers of a car fall into the most, and one that you should never do. it's called 'premium evasion'.
what is 'insurance evasion'?
it's a trick where the named insured is replaced by another co-owner in order to avoid paying a higher premium in the event of an accident.
here's an example
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year 1: You take out a policy in your father' s name (named insured: father)
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accident: Your child gets into an accident while driving.
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problem: The accident history follows the father as the 'named insured', not the driver. next year, the father's premium will increase.
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the trick: " Oh, well, let's get a new policy next year in the mother's name with a 1% share!"
change of name after the accident, invoking a 50% surcharge
that's right, number 4 is consideredpremium evasion. insurers share a history. if they catch you signing up under someone else's name, such as a family member, right after an accident to avoid a premium surcharge, they'll apply a "special surcharge" instead of the normal accident surcharge.
this surcharge can be as high as 50%. this is one of the most important things to keep in mind when it comes tojointly insuring a car, as you could end up paying a 50% surcharge to avoid a 10-20% surcharge.
how the real pros save on car insurance
so, are there ways tosavemoneyon car insurance other than riskyjoint names? yes, there is, and it's much safer and smarter.
take advantage of driving experience credit
the biggest problem withjoint ownership is that no matter how much your child drives, they don't build up their own 'insurance experience' because it's in their father's name. After all, you can't hide behind your parents' name forever.
this is where the "driving experience credit system" comes in. you can add yourself to your parent's or spouse's car insurance policy as a "family only" or "named driver" rider, and then ask the insurer to "add me as a driving credit holder" (up to two people)
this way, when you buy a policy in your own name 1-3 years from now, you'll be recognized as an "experienced driver" instead of a "first-time buyer" and can start at a much lower rate. military driving experience, overseas driving experience, and more are also recognized.
if you have more than one car, bundle them into a 'same policy'
if you already have a car of your own, and you're buying another car in joint name for your child (for a total of two cars), ask for'same policy' treatment .
if the two cars are insured under different policies (separate policies), you run the risk of being charged for your original car insurance if your child gets into an accident.
but if they're on the same policy, you can separate (isolate) the risk so that the surcharge only applies to the car that's in an accident (the child's car) and the parent's original car isn't affected.
frequently asked questions (FAQs) about joint car ownership
Q1. What are the methods and procedures for joint ownership of a car? A : When buying a new car, it's as simple as asking the dealer to register it in joint names (e.g. 99% for you and 1% for your parents) during the contract stage and providing the necessary documents (ID, etc.). if you are changing the name of a vehicle that was previously in your sole name, it is a bit more complicated as you need to visit the vehicle registration office in person with the necessary documents (transfer registration application, transfer certificate, transferor's seal certificate, etc.
Q2. If I get into an accident while driving, will my parent's insurance premium be increased if they only have a 1% share? A : Yes, the accident history will remain in the name of the 'named insured' on the insurance policy, regardless of the ownership share or actual driver. if you have a policy in your name, if your child gets into an accident while driving, it will be recorded as a parental accident and your premium will be increased for the following year.
Q3. Does joint ownership of a car save on taxes (acquisition tax)? A : In general, there is no tax savings, which is a common misconception about thetax benefits of joint ownership. the car acquisition tax is a single rate based on the value of the vehicle, so joint ownership does not mean you pay less. However, if one of the joint owners is disabled or a national meritorious person, they may be eligible for a reduction in acquisition tax or car tax if they meet certain requirements (e.g., 2,000cc or less, joint household, etc.).
conclusion: What's the smartest savings strategy for you?
joint ownership of a caris certainly a powerful strategy to lower the high cost of insurance for first-time buyers in the short term. but it's important to remember that it's not a "frugality trick," it's a legal agreement to share your family's credit and assets.
it's not worth risking losing your parents' Social Security or having your car repossessed for a 1% stake to save $100.
the smartest way tosave money on car insuranceis to build up your own career through the 'driving experience credit system', and approachjoint ownershipas a 'short-term strategy' that can only be used for 1-3 years before you need to check your parents' basic pension and the value of the car (based on the 40 million won threshold).
key one-liner summary: Joint ownership of a car can be a 'shortcut' to saving money on insurance, but it can be a 'bomb' if you don't know the 'pitfalls'.
how much was your first car insurance premium? If you're thinking about or have already usedjoint nameson a car, tell us your story in the comments.
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