Every teenager dreams of the day they pass their driver's test and have a license to freedom. Coincidentally, this is also the very same day every parent dreads the most.
Sure, it's great that your teen can now drive himself to school, practice, and pick up milk when you're out, but many parents worry about the cost of adding their new teen driver to their insurance policy.
Did you know that some car insurance plans can go up anywhere from 50 - 300% just by adding a teen driver?
You're right to be worried about saving money. With premiums that high, you'll have to pick up another job just to pay for coverage!
Don't get stuck forking over this extra cash without trying a few of our money-saving tips today. By being proactive and informed, you may be able to save loads of money on car insurance even with a teenager on your policy. We'll show you exactly what we mean in today's article.
But first, let's get to the basics.
Why Do Teenagers Cost SO Much to Cover?
Insurance companies are all about assessing risks. They take one look at teenage drivers and immediately see the worst statistics.
According to the Centers for Disease Control and Prevention:
- Motor vehicle crashes are the leading cause of death for U.S. teens.
- Motor vehicle crashes are higher among 16-19-year-olds than among any other age group.
- Young people ages 15 - 24 represent only 14% of the U.S. population. However, they account for 30% ($19 billion) of the total costs of motor vehicle injuries among males, and 28% ($7 billion) of the total costs of motor vehicle injuries among females.
It's hard to argue with information like that. This is why insurance companies charge teens higher rates than any other age group.
Your insurance provider will explain that teen drivers:
- Have less experience driving so they underestimate or fail to recognize dangerous situations
- Get into more accidents the more teen passengers they have in the car
- Have the lowest rate of seatbelt usage among all age groups
- Tend to be distracted while driving
Teenage boys are seen as riskier drivers than female teenagers as they often speed more, drive under the influence, and get into more accidents due to dangerous behavior.
Believe it or not, some insurance companies don't want to deal with the headaches of insuring teen drivers so they will purposefully raise your premiums in the hope that you'll take your business elsewhere.
While this may seem pretty crummy for you, it may actually be a blessing in disguise if you find cheaper insurance (and better customer service) elsewhere. Don't be intimidated to shop around for a new policy - it will be a piece of cake once you know a few tricks.
How to Shop for (Teen Friendly) Car Insurance
You don't have to stick with your current insurance provider if they're not going to work with your budget now that a new teen driver will be on your policy. While it can be awkward to prod for discounts (especially if you're close to your neighborhood insurance agent), it won't be awkward saving that extra money every month.
If your current insurance provider is charging too much, politely thank them for the great years of service, but explain that you have to save up for college tuition and expenses of that nature, so you're going to shop around for other companies that offer larger discounts.
Keep in mind that a captive insurance agent will only be able to offer you rates for the insurance company he or she represents, whereas an independent insurance agent will be able to shop around for policies from different companies to make sure you get the best rate possible.
Take these steps to start off on a well-informed foot:
Understand Your Current Policy First
In order to establish a baseline for which to compare the quotes you're going to hunt for, you need to first understand what you're currently paying for. Go over your insurance policy line by line with your provider to make sure you know the ins and outs of your coverage plan.
Once you know what your current rate covers, you'll be able to see if new rates with possibly less coverage are worth making the switch.
Trisha Mujadin, an independent insurance agent, recommends "liability limits of at least $250,000 per person, $500,000 per accident, and $100,000 for property damage (or a policy with a "combined single limit" of $500,000, when available, which doesn't limit the coverage to $250,000 per person involved in the accident)."
Bundle to Save Big
Bundling your auto insurance with your homeowners or renters insurance (or even business insurance if you're self-employed) will garner a few extra discounts with your insurance provider. If you opt for an umbrella policy to provide extra liability coverage that extends past the coverage limits of your policy, you'll also enjoy a bit of a discount.
Drop Collision and Comprehensive Coverage
If you're not wrapping up a brand new Ferrari for your teen's super sweet 16th birthday, you may be able to save on collision and comprehensive coverage.
As Kimberly Lankford writes for Kiplinger, you can drop this coverage entirely "on older cars that are worth little more than the deductible. You may be paying more in premiums than you could ever get back from the insurer, even if the car is totaled."
Lankford recommends checking the value of your teen's car on the industry standard, Kelley Blue Book. Using some basic math, you'll be able to see that a car worth $1,000 for example, isn't worth an additional $300 of comp and collision coverage every month.
Consider Changing Your Deductible
If your goal is to reduce monthly payments, you may want to reassess your deductible amount. Your deductible is the amount you'll have to shell out if your car needs any bodywork or repairs done in the event it gets damaged.
If you change your low $500 deductible and raise it to $1,000, you will be on the hook for a larger amount if your teen gets into an accident with the car, but your premiums will drop significantly since you're taking on more a greater financial burden.
Don't shoot yourself in the foot here - this option only works if your family isn't accident prone. If Dad nicks bumpers parking downtown or your teen parks his car at the driving range he works at, this may not be the best route for you. Every minor repair will be coming out of your pocket until you hit the $1,000 mark for your insurance company to help out.
Your Teen May Need Their Own Policy
Depending on where you live, it may be close to impossible to find a reasonable quote for your family policy that includes your teen driver. For instance, if your rates are already high thanks to a few speeding tickets or a low credit score, adding a teen may make the rates impossible to afford. Don't start ripping out your hair - there's another option to consider.
Your teen can get on their own car insurance policy. If the cost of their own policy is less than what you're being charged to add them to your plan, get your child the separate policy and wait for a minimum of six months before contacting the insurance provider and asking for a discount.
Some companies will need that driving history to begin lowering their rates. Of course, your teen will need to have a clean driving record to show the insurance provider that he's a safe driver worthy of lower payments.
Your teen may even qualify for discounts just for being a new customer.
If you want to keep your teen on your current policy (or find that a separate policy is just as expensive), we know a few other major discounts that should help lower your premiums. Make sure to use them when negotiating your rates from this point forward.
Car Insurance Discounts for Teen Drivers
Now that you know why it's so expensive to cover teen drivers, you may be thinking your financial situation is hopeless. However, there are a few steps your teen can take to ensure you save money on your higher premiums.
Driver's Education Class
Because teenage drivers are so inexperienced, insurance companies like to see that they've had some formal training that extends beyond you showing them how to parallel park in a big empty parking lot.
Enroll your teen in a driver's ed class or other approved driver training program. Not only will your teen learn valuable lessons about the rules of the road, but they'll also have real world training with a driving expert (who probably has more patience and gray hairs than you do).
Plus, having your teen take one of these classes could save you up to 10%.
Liberty Mutual offers an online driving course for teens called teenSMART which focuses on the "big six" factors that cause most teen driving accidents. They claim that teens who finish the program have up to 30% fewer collisions in their first year of driving - which sounds pretty discount worthy.
State Farm has a similar program called Steer Clear, which can save families up to 15% off their premiums.
Defensive Driving Class
Your teen can also sign up for a defensive driving class that will teach him how to safely scope out dangerous situations and react appropriately. These classes are typically completed in 5 - 6 hours instead of longer driver's education classes which could take a few weeks or months to complete.
DMV.org says that a defensive driving course covers the following topics:
- Defensive driving techniques
- Traffic laws
- Drug and alcohol awareness
- Driving in adverse weather
When insurance companies see that your teen successfully finished one of these courses, they know your teen will be statistically less likely to drive recklessly or get into accidents. You may be eligible for a 10% discount, which will definitely add up over time.
Visit this link to make sure your state carries defensive driving courses that your insurance provider accepts.
Your Teen Drives a Safe Car
Adding another car to your policy may qualify you for a multi-car discount. But there are a few stipulations about what kind of car your teen should be driving.
It should go without saying, but giving your teen a fast sports car will force your premiums to go through the roof. Similarly, large SUVs and cars or trucks with V6 or V8 engines will also cost more to insure. While some of these are just seen as risky rides, others cost more to repair (so the insurance company wants some of that money upfront from you).
Opt for safer vehicles such as minivans, four-door sedans, hybrids, and small SUVs for your teen. Check out the safety ratings from the Insurance Institute for Highway Safety (IIHS) before your next purchase. See if you can speak with your insurance provider about a discounted rate for their most preferred vehicles before you buy.
Older, used vehicles that still fall into the safe car zone will cost less to insure since their value is less than the value of replacing a new car in the event of an accident that completely totals the vehicle.
Remember that while insurance companies have to spend more to cover brand new cars with all the latest technological gadgets, you may actually see a discount if those features bring an additional element of safety to your teen's car.
Keep Your Teen's Grades Up
Just like your credit score is used to determine your car insurance premiums (yes, really!), your teen's grades in school are used to assess their costs of coverage.
Insurance companies usually offer discounts to good students as they're typically less likely to make unsafe decisions or engage in risky or aggressive driving behavior. Your teen must be enrolled in high school or college full time, or be part of an accredited home-study program.
Now, you can't just show a report card full of smiley faces; your teen needs to show information such as:
- A 3.0 GPA, or B average, or higher for all combined subjects
- Achievements such as making honor roll or dean's list
- Ranking in the upper 20th percentile on select standardized tests
Depending on your state and insurance company, good grades will qualify for even better discounts.
Take a look at these examples of savings:
Track Where, When, and How Often Your Teen Drives
Many insurance companies now have the technology to track your teen's driving habits. For example, Allstate has a program called Drivewise that monitors driving behaviors and rewards you for safe driving.
Your insurance company will install a small device in your car that will track and share driving information such as your speed and how many miles you're driving.
Typically, insurance companies monitor these devices and reward you for:
- Not speeding
- Avoiding hard braking
- Driving during safe hours (skipping late-night joyrides)
While your teen may accrue safe driving discounts, it's also important to monitor the distance your teen is driving.
Market Watch explains that if anyone in your family is driving less than 12,000 miles each year, you may be able to save an average of 11%.
If you or your teen drive less than 5 - 15 miles to get to work or school, you may also qualify for an additional 4% in savings.
It would also stand to reason that if your teen is enrolled in a school that's at least 100 miles away from your residence, and doesn't take a car, you could qualify for very low rates since he won't be driving until he's home again.
If one or more of your family members is a stay-at-home parent, or works from home, thusly eliminating a daily commute, you should also ask for a discount. Homeschooling your kids? You can definitely maximize your savings since your driving usage is so minimal.
Put Your New Knowledge to Practice
Now that you know how to shop for teen-friendly auto insurance, and you even know which discounts to ask for specifically, let's put all of your knowledge to work to make sure you're getting the best rates possible.
Don't Accept the First Quote
Speak with your current provider about the discounts you now know you're eligible for and see how they work with you to lower your payments. If they refuse to budge, or only discount your premiums slightly, move on to the next company - there are plenty of car insurance providers willing to honor these discounts to get your business.
You should price shop a minimum of three different insurance companies to see how rates compare in your area.
Use Our Handy Tool for an Unbiased Quote
Quote.com makes it a breeze to shop around for competitive car insurance rates without ever having to leave your house. You can even price plans from the top car insurance providers while you're waiting for your teen to return from his driver's license road test.
All you have to do is input your zip code and answer a few easy questions to have an unbiased and competitive quote in minutes.
There's no reason to worry about adding your new teen driver to your car insurance policy. Yes, your premiums are going to increase, but if you follow a few of our tips today, you'll be able to shop for teen-friendly car insurance in less than an hour. Plus, you'll know exactly which discounts to ask for so your rates don't increase 300%.
Now all you have to do is buy your teen a chauffeur's hat and gloves so you can ride around in style (instead of stressing about your premiums!)