Most teenagers count the days until they can get behind the wheel of a car and cruise. Many of their parents count the days, too, but for many different reasons. For the teens, it means freedom and fun. For parents, it means sleepless nights and lighter pocketbooks.
The parents' concerns are valid. Drivers under 25 are four times as likely as older drivers to die in an accident, reports the National Highway Traffic Safety Administration. As a result, adding a 16-year-old driver to your auto insurance policy can come with a hefty price tag. Premium increases of 50 to 100 percent are possible. Fortunately, you can take steps to somewhat control premium increases.
Shop around
Start by comparison shopping. While rates for 40-somethings may be fairly standard among insurers, that's not always the case.
Consider a higher deductible. Going from a $250 to $500 or $1,000 deductible can potentially save you 10 percent to 20 percent on your premium. You'll want to consider whether you can absorb the out-of-pocket expense in the event of an accident. You might also want to evaluate taking out a separate policy for your teen.
Assuming you have a good claims history, you're probably best off simply adding your teen driver to your own policy and paying the increased premium. On the other hand, if your driving record is less than desirable, or you drive expensive cars, it may be less expensive to get your teen a separate policy.
Down the road, you'll want to check when your insurer classifies young drivers as adults. At that point, you should see a decrease in your rates.
While some companies classify drivers as adults at age 25, some offer lower rates for 23-year-old drivers. Drivers who marry, even if they're younger than 25, may qualify for lower auto premiums. Also, as your teen becomes a twenty-something, it's worth checking whether he or she should move to a separate policy.
Choice of car
If you're planning to purchase another car, think carefully about your choices. While your son or daughter may be begging for a new sports car, a safe and stodgy used car will be easier on your insurance rates. It's less likely to be stolen, and probably will do better in a crash test. Your premiums should reflect these differences.
Should you get a car, it probably will make sense to keep it in your name.
Whether or not you buy another car, you can ask your insurer to assign your teen driver to just one of your cars. In other words, the insurer would calculate your premium under the assumption that your teenager only drives a specific car, typically a less expensive one.
Be alert, however, some insurers will not assign certain cars to certain drivers. They assume anyone in the house can drive any of the cars. And, according to some experts, you can expect that the insurance company will also price the premium based on the highest risk vehicle on your policy.
If your insurance carrier agrees to assign your teen to a specific car, you need to lay down the law. Your new driver should take only the car to which he or she is assigned, even in an emergency.
If your teen drives another car and gets in an accident, your rates likely will get a hefty boost. Your insurer could even impose a penalty or decide not to renew your policy.
Think safety first
Helping your son or daughter establish a good driving record will be your best protection against sky-high insurance rates. Of course, the primary objective of driving safely is to prevent injuries and fatalities. However, traffic violations and accidents also directly affect your pocketbook. If your teenager's drinking or recklessness results in an accident, your premiums can jump by several hundred percent.
The longer your teenager motors along without an accident or traffic violation, the more you'll be able to negotiate lower premiums. More importantly, you'll know that your son or daughter is less likely to be involved in an accident.
Making the grade
Let your insurance company know if your child has a B or better grade average. Studies show a correlation between good students and responsible drivers, so many insurers offer good-student discounts, which typically range from 5 percent to 10 percent.
It also helps to have your child take a driver's education course, rather than try to teach him or her the rules of the road yourself. Such courses can be good for discounts as well. Just make sure the course you have in mind is approved by your insurer. Some insurers offer "safe driver programs." Teen participants in these programs sign contracts stating that they won't, for example, drink and drive. Check with your insurance company. If your teenager completes the program, you may be able to cut another 5 percent or so from your increase.
More states have now enacted what are known as "graduated licenses." New drivers are restricted from certain activities, such as driving with passengers, until they've had their licenses for a set period, such as six months. If you live in one of these states, ask if any discounts are available. Some insurers may take a few percentage points off your increase.
Finally, you may be eligible for lower premiums once your teen heads to college. Many insurers will reduce rates for students attending a school at least 100 miles away from home and who don't have a car on campus.
What to avoid
As you're checking out insurance for your teen driver, you'll want to avoid a few potential pitfalls. First, don't put it off. As soon as your teenager is ready to get a permit, let your insurance company know. If you forget and your child is involved in an accident, your insurance company (in some situations) may cover it. However, it can retroactively charge the higher premium that you should have been paying. In an extreme case, it could revoke your coverage.
You also don't want to drastically lower your liability coverage in order to reduce your rate increase. Granted, doing so may save a few dollars short-term. However, it doesn't make sense to carry less coverage on a higher-risk driver. Should your teenager get into an accident, you'll be forced to cover the damages from your own pocket.
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