Finding low-cost solutions to auto insurance becomes increasingly difficult when you have a teen who drives. Drivers age 16 to 24 are the highest-risk drivers in the nation, and insurance companies make them pay for it. In order to economize, you, as a parent, are going to want to keep your teen off of your auto policy for as long as possible.

But do you have to add your teen to your policy when he gets a driver's permit or a driver's license? The answer can mean an increase in your insurance rate of hundreds of dollars.

Permit vs. license

Driving permits allow teens to get on the road, but under some restrictions: There must be a licensed driver in the vehicle and, in some states, teens with permits are confined to daytime driving only. In addition, a driver's permit generally expires after 60, 90, or 180 days.

With a driver's license, on the other hand, teens can motor to their hearts' content. Restrictions may include the type of vehicle and whether or not the driver must wear corrective lenses.

Some states (including Illinois, Indiana, Maryland, New York, North Carolina, Ohio, Pennsylvania, Virginia, and West Virginia) allow insurance companies to require that you list a teen with a driving permit on your insurance policy. Many insurers generally do not charge insurance premiums for teens with driver's permits, opting to wait until they are licensed drivers, but you should still list them on your policy.

Insurance companies will look for a particular date, either your teen's 16th birthdate or the date his or her permit expires, to begin charging you for an additional driver. You'll have to be proactive if the teen doesn't follow through and get a license. You'll want to notify your insurer that the teen isn't a licensed driver yet so that your next car insurance bill isn't a shocker.

Some insurers will raise your premiums for adding your teen when he or she procures a permit if you are insured in a "high risk" pool.

You should definitely inform your insurance company when your teen has a license, but if you forget and your teen is involved in a crash, it's not likely your insurer will deny your claim if your teen obtained his or her license after the effective date of your policy. Your teen is "an insured" under your policy although the insurance company then has the right to charge you back premiums for your teen from the date he or she received a driver's license. However, if your teen obtained his or her license before your policy renewed and you failed to notify your insurer of this fact, the situation is less clear. Many jurisdictions could consider this a misrepresentation of a material fact and permit the insurer to deny coverage in the event of an accident. The safest course is to notify your insurer as soon as your child starts to drive your auto.

Addition by subtraction

You might be able to save some cash by excluding your teen from your policy under a "named exclusion." This allows you to exclude your child from coverage under your policy but requires that your teen has his or her own insurance policy and owns his or her own car. (Be careful: If your teen drives your car anyway and crashes, your insurance won't pay for anything since he or she is an excluded driver.) You'll also need to check and be sure this is allowed in your state.

Older vehicles can cost less to insure too, since they represent a lower risk than newer vehicles because repairing them isn't as costly. Lower risk for the insurer usually translates into lower costs for the policyholder. Excluding collision and comprehensive coverages from the older vehicle's policy can lower your insurance costs, too.

Parents generally are eligible for more savings than the teen, such as a good-driver discount and the "multiple vehicles on one policy" discount. So, in some cases, it might be a good idea if the parent owned the vehicle and had the teen under his or her policy.

Savings can also be affected by the kind of car you drive. If you have a Corvette or Camaro, or other high-profile vehicle, a separate policy for your teen on a different vehicle is a good idea, especially if your teen is female. Female teens are not considered as high-risk as male teens and will generally qualify for a lower insurance rate.