Everything You Need to Know About Insuring Your Teenage Driver
Insuring a teenage driver is almost as scary as handing over the keys. You've probably heard horror stories about premiums increasing by as much as $1,000 once a teen is added to the plan. While this can happen, it doesn't have to. One key thing to remember is that you do have some control over how much insuring your teen will cost. We created this guide to help you learn some tricks and tips you can use to insure a teen driver without breaking the bank.
Step One: Signing Up Your Teen for Car Insurance
As your teen prepares for a driver's license, you should start thinking about getting car insurance for him or her. Here as some questions to consider.
Do I Have to Insure My Teenager Driver?
This is almost always going to be a resounding "yes," but we aren't here to discuss loopholes in the law. We highly recommend that once your teen has a driver's license you sign him or her up for car insurance.
Not listing a teenager driver on your insurance policy can have steep consequences. If your teen were to be involved in an accident without insurance, your insurance company may refuse to extend its coverage to that driver.
When Must I Insure My Teen Driver?
Most insurance companies and states do not require teens to be insured until they have a driver's license. If your teen only has a learner's permit, odds are you don't need to do anything yet (though it doesn't hurt to start preparing now if this is the case!).
It never hurts to let your company know when your teen has a learner's permit either. In fact, some insurance companies will add your teen onto your insurance policy as soon as he or she turns 16 regardless of whether your teen is even licensed yet. For this reason and because your teen will be behind the wheel when he or she has a permit, it's good to keep your insurance company informed.
How Do I Insure My Teen Driver?
When it comes to insuring your teenage driver, you have three options: have the teen sign up for a new policy, add the teen to your current policy, or add the teen to your policy but list him or her as excluded. Let's break each of these down so you have a better idea about which one works best for your family.
Should My Teen Have His or Her Own Insurance Policy? What Are the Pros and Cons?
It is commonly thought that adding a teen onto an existing policy is your best option. While this works well for most people, we want to show you the pros and cons of letting a teen get his or her own insurance.
Sometimes it will be cheaper for your teen to carry her or his own policy. Usually this isn't the case, but depending on where your teen is living, along with other factors, it does happen. For example, if you have a bad driving record then putting your teen on a new policy may save money. We advise you to speak with an insurance agent directly to compare the costs of having your teen his or her own policy versus being added to yours.
Having car insurance lets a teen build up his or her credit history. Should your teen pay on time and be an overall trouble-free customer, he or she can build credibility, which may benefit your teen in the future through things like lower renter's insurance.
It will almost always cost your teen more to be under his or her own policy, since the teen will usually miss out on lots of discounts. Putting a teen be on his or her own policy will be an expensive option most of the time.
Should I Add My Teen to My Current Insurance Policy? What Are the Pros and Cons?
Most people prefer this option when it comes to insuring a teenage driver. There are some insurance companies that will not even allow a teenager to own his or her own policy and some that will automatically add your teen to an existing policy once he or she turns 16 years old. Regardless of what companies or other people prefer, you and your teen need to decide what is best for your family and circumstances. Here are some pros and cons to consider.
You can usually save a significant amount of money by adding your teenager to an existing policy. The base price will usually be cheaper, and there are also many ways to lower the price even more if you know how to do it. More information on this is provided below.
Some insurance companies will offer various safety features for teen drivers as well, like a device that can help monitor their driving. Keep in mind these services will bump the price up a bit.
Adding a teenager to your policy will increase your rates. There is no way around this. Since teenagers cause a significant percentage of accidents, they are considered high risk drivers by all insurance companies. Due to this, there is no way to insure a teen without taking on some extra cost.
The biggest risk and disadvantage that comes with putting a teen driver on your policy is the threat of losing your good driver discount, if you have one. If your teen gets into an accident (even if he or she is not at fault) or a traffic violation, you may lose the good driver discount you have built for yourself.
If My Spouse and I are Divorced How Should Our Teen Be Insured?
This is a tricky question, and the answer isn't straightforward. Depending on the insurance company, usually the parent with more custody will be responsible for insuring the driver. This isn't always the case, though, and sometimes both parents will end up having to add the teen to their respective policies. Make sure you call your insurance company to see what options are available to you.
Should I List My Teenager as a "Named Exclusion" on My Policy?
If you decide to exclude your teenage driver from your policy, this means your teen will be listed on the policy but will not receive liability coverage. Physical damage is also not covered. Having a teen listed as an excluded driver will usually raise the cost of a policy a bit, since excluded drivers are usually covered for medical, but it will not increase as much as if your teenager was fully covered.
The benefits to this is lowering the cost, but the disadvantage is having no coverage for your teenager.
Step Two: How to Lower Your Rates After Adding a Teenage Driver
Once your teen is on your policy or has his or her own, it's time to figure out how you can lower the cost as much as possible. There are several ways to do this, some of which you have control over and some that apply on a case-by-case basis.
How Does a "Good Grades" Discount Work? What About Driver Education Courses?
Generally, insurance companies will offer a discount if your teenager maintains a GPA of 3.0 or higher. This means if your student is averaging a B grade in high school or college you can get a five to ten percent discount, though this number will go up and down depending on which company you use.
Though most states require teenagers to take a driver education course, even if they don't you can still get a hefty discount by having your teen complete one. As always, you will want to check with your insurance company directly to see if this is possible in your state and how much of a discount you can receive.
Can a Driving Improvement Course Affect Rates?
Yes! Teens aren't the only ones who get a discount for taking a course. Parents and teens can may also receive an insurance discount for completing a driver improvement course, which are frequently called defensive driving courses. Again, check with your insurance company before you sign up for anything. This is worth investigating because it's an easy discount you can control.
How Does Choice of Car Affect Insurance Costs?
When it comes to buying a car for your teen there are a lot of factors to consider. One of the most prominent is how significantly this choice affects your insurance costs. Older cars with less added features and more miles will usually cost less to insure than new, souped-up models. However, certain safety features, like anti-lock brakes (ABS), are often considered standard and a car without them could have a higher insurance cost. The overall safety rating of a car will also factor into the price, and cars with better safety ratings will cost less to insure.
Remember that insurance is calculated by risk. If the insurance company thinks a car is high risk, the cost to insure it will rise. So even if the car has a lot if safety features, it can be pricey because those safety features increase the value of the car and in turn create more risk for the company.
As always, check with your insurance company to see how car choice will affect the cost for your teen driver. If you want to learn more about buying a first car for your teen, Every Parent's Go-to Guide to Buying Their Teen's First Car.
Should I Increase My Deductible if I Add My Teen? What About Lowering My Collision/Comprehensive Coverage?
If you increase your deductible after adding a teenage driver, this may help you decrease your premium overall. This does mean you'll have to pay more should an accident occur, but if no one gets in an accident — which is what we all are hoping for — you'll end up paying less.
Just like your deductible, lowering comprehensive and collision coverage can help lower the overall cost of your car insurance. It does afford you less protection, however.
What are the Benefits of Staying Accident Free? What if My Teen Gets a Ticket/Traffic Violation?
This applies for everyone who is on the policy. Having a clean driving record will help keep your costs down, and it will help you keep a good driver's discount. Though teen drivers have no driving records and cannot prove they are safe drivers, which is partly why they cost so much to insure, they can start building one. Over time, as they don't get traffic violations or cause accidents, they will garner more trust and their car insurance rates will go down.
Chances are, if your teen gets a ticket or a traffic violation, your premiums will increase if this happens. This is why another way to keep your rates low is to avoid traffic tickets. This is obviously done through safe driving and obeying the law.
Should I List My Teen as an "Occasional Driver?"
If your teen will not be using a car that often, be sure to list him or her as an occasional or pleasure driver. This will keep your rates lower.
How Do Multiple Vehicle Discounts Work? What About Bundling Home and Car Insurance and Loyal Customer Discounts?
If you have several cars attached to a single policy, most insurance companies will give you a discount. Be sure to ask about it when you're adding your teen to your insurance policy.
If you can, bundle your home insurance with your car insurance. This will help lower your rates once you've added a teen driver to the plan.
You may be eligible for a loyalty discount if you haven't been bouncing between car insurance companies. However, we always advise that while you ask about this, you should still shop around. Other companies may be able to offer a lower rate even without this discount.
Should I Consider Paying My Premiums in Full?
If you pay for your premium in full, you might be able to lower your car insurance. As always, ask your insurance company to find out.
While insuring a teenager driver is expensive, there are a lot of ways to reduce that cost. Remember to explore all your options and to do your research before signing your teen up for a policy or adding them to one.
Step Three: Monitor Your Insurance Rates Regularly
Regardless of how you initially set up insurance for your teen, whether he or she is on your policy or if your teen gets a separate policy, monitor it at least every quarter to see if any of the above discounts can be applied. You may not be able to use or qualify for these discounts and reductions right away, but they can become goals you and your teen can work toward. For example, if your teen doesn't qualify for a good grades discount initially, this can become a goal, as can taking a driver improvement course. Keeping a close eye on premiums can help you maximize potential future discounts.