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Car insurance for teens

Handing your child the car keys for the first time is bound to be exciting — and scary. For your teen, driving invites a thrilling move toward independence and freedom, but also comes with the tremendous responsibility of getting behind the wheel of a machine that can cause a lot of damage if not driven carefully and appropriately. For the parent, it often comes with anxiety over safety and the added cost of insuring that teenage driver.

Teen licensing and insurance laws have changed significantly since you learned to drive, so as your child approaches the age of driving, start thinking about how to properly insure him or her. Insurance for teens can be confusing, pricey, and hurried. By doing research and asking questions, you can overcome the confusion, and possibly reduce the cost, of insuring your young driver.

How to insure a teen driver

Insure.com recommends these six steps when adding your teen driver to your policy. Continue reading below for additional information on each step.

  1. Talk to your current insurance company about when you must add your child, whether at permit stage or when license is obtained.
  2. Get a quote for adding your child to your existing policy with higher liabilities (100/300/50 is recommended).
  3. Shop around with other car insurance companies to find the best rates.
  4. Add your child at the appropriate time to your current policy or a new insurer with better rates. Remember to ask for discounts with both.
  5. To keep your child safe and insurance rates low (as low as teenage rates can be), monitor your child as a driver and insist on good driving behavior.
  6. Shop at each renewal, or at least once a year, to make sure your rates are the cheapest possible. Also, check if new discounts are available, such as if your child has raised his grades and would now qualify for a good student discount or has taken a driving course.

 

When to add a teen driver to your auto insurance policy

The cost of adding a teen driver to car insurance

Teenage boys are more expensive to insure than girls

Saving money on teen car insurance rates

Other ways to save on your policy

Should a teen get his own policy or go on a parent’s policy?

Excluding a teen driver from parent’s policy

Insurance covers bad driving by teens

Insurance coverages your teen should have

Advice for parents of novice drivers

Car insurance rates will go down – eventually

When to add a teen driver to your auto insurance policy

One of the most common questions from parents of teens is when to notify their insurance company of the new driver. There is no standard rule whether you should add your teen when he gets his permit or wait until he progresses to a license. Instead, when to add a teen driver varies depending on state laws, as well as your insurance company’s internal guidelines. 

Many car insurance companies allow parents to list a teen with a learner’s permit on the policy at no charge until the child becomes a fully licensed driver or turns 18 years of age (whichever is first). At the permit stage, the driver must have a licensed driver over the age of 21 in the passenger seat to supervise, making the teen much less of a risk. However, not all insurance companies follow this guideline; some companies require you to add the teen and start paying premiums for him once he has received his permit. Thus, you should contact your car insurance provider before your child gets his or her permit to find out when your current insurer requires you to add your teen driver.

If your child wants to wait to get a license that will certainly save you money, but don’t be surprised if your insurance company asks you about your teen and if he is licensed. Insurers receive reports that list residents at your address and will know you have a teenager. If your child does not have a permit or license, your insurance company may still list him on the policy, but as unlicensed and unrated, which won't affect your premiums.

Don’t try to beat the system by failing to add your teen driver to your policy. If you do, and your child is in an accident, your car insurance company could deny coverages stating you committed fraud, specifically material misrepresentation, by not informing it of the licensed driver. Alternatively, your insurer may cover the accident but then require you to pay all premiums that should have been paid since your child was licensed. Instead of having his premium spread out during all the months he was licensed, it will be due all at once. 

The cost of adding a teen driver to car insurance

The really big question is: How much does it cost to add a teenager to my car insurance? The answer: A lot. Teen drivers are immature and inexperienced, which is a horrible combination for premiums since insurance companies look at how much risk a driver poses. Young drivers are at the top of the risk list.

The California Department of Motor Vehicles points out to parents that male and female drivers ages 16 to 19 have the highest average annual crash and traffic violation rates of any age group. The Centers for Disease Control and Prevention (CDC) notes that young people ages 15 to 24 represent only 14 percent of the U.S. population, but this group accounts for 30 percent of total costs of motor vehicle injuries among males and 28 percent among females.

The reasons for the higher auto insurance are clear, but how much will it cost? Insure.com found that adding a teen driver increases car insurance rates an average of 152 percent. It varies by state and by how much an insurer weighs age and experience into its ratings calculations. So, if you live outside of Hawaii, whose laws don’t allow insurers to rate age, your rates may go up between 100 to 200 percent (or more) when you add a teenage driver to your auto policy.

Policy rate increases by state with teen driver

State

 Adult alone

 With teen

Increase

Alabama

$1,217

$3,521

184%

Alaska

$1,188

$3,384

181%

Arizona

$1,009

$2,984

192%

Arkansas

$1,277

$3,059

143%

California

$1,461

$4,903

227%

Colorado

$1,095

$2,664

142%

Connecticut

$1,597

$4,917

217%

Delaware

$1,538

$4,155

170%

District of Columbia

$1,628

$3,527

118%

Florida

$1,463

$3,849

172%

Georgia

$1,210

$3,263

168%

Hawaii

$1,104

$1,121

2%

Idaho

$822

$2,583

217%

Illinois

$990

$3,030

195%

Indiana

$950

$2,400

162%

Iowa

$939

$2,484

159%

Kansas

$1,141

$2,664

130%

Kentucky

$1,177

$3,102

174%

Louisiana

$1,645

$4,943

194%

Maine

$758

$1,942

153%

Maryland

$1,260

$3,418

169%

Massachusetts

$1,469

$3,228

132%

Michigan

$2,297

$5,223

121%

Minnesota

$1,270

$2,704

124%

Mississippi

$1,218

$2,930

146%

Missouri

$1,039

$2,406

130%

Montana

$1,321

$2,935

126%

Nebraska

$1,035

$2,527

147%

Nevada

$1,113

$2,651

132%

New Hampshire

$865

$2,450

186%

New Jersey

$1,348

$4,092

204%

New Mexico

$1,125

$2,466

113%

New York

$1,336

$3,320

147%

North Carolina

$836

$2,408

204%

North Dakota

$1,365

$2,758

116%

Ohio

$763

$1,757

136%

Oklahoma

$1,405

$3,006

114%

Oregon

$1,110

$2,577

133%

Pennsylvania

$1,252

$3,046

146%

Rhode Island

$2,117

$5,750

149%

South Carolina

$1,055

$2,674

155%

South Dakota

$1,080

$2,260

109%

Tennessee

$1,256

$2,881

134%

Texas

$1,416

$3,534

145%

Utah

$935

$2,165

131%

Vermont

$900

$2,288

146%

Virginia

$849

$2,288

167%

Washington

$1,075

$2,636

144%

West Virginia

$1,534

$3,914

168%

Wisconsin

$863

$2,185

157%

Wyoming

$1,237

$3,175

156%

*Averages

$1,215

$3,059

152%

*Based on a 2014 Honda Accord driven by a 40-year-old male buying 100/300/50 liability coverages with comprehensive and collision coverage and the addition of the average rates for a 16-year-old driver.  

Teenage boys are more expensive to insure than girls

Auto insurance is one industry where the term “gender equality” doesn’t apply – unless you live in the handful of states where there is a law against using gender as a factor in rates. Insurance companies use statistics to create rates, and the numbers don’t lie: while teenagers in general are a high-risk group, teenage boys are significantly higher risks than teenage girls. Therefore, be prepared to pay higher rates for your teenage son (except in Hawaii, Massachusetts, Montana, North Carolina and Pennsylvania where it is not allowed).

Teenage vehicle deaths

* IIHS analysis of U.S. Dept. of Transportation FARS data http://www.iihs.org/iihs/topics/t/teenagers/fatalityfacts/teenagers

Some good news for males, as they mature behind the wheel and become less aggressive, their rates will decrease.  By the time males hit their 30s their car insurance rates will be on par with female rates. By age 35, typically males will even pay a bit less than female drivers.

Saving money on teen car insurance rates

Skyrocketing rates caused by adding a teen can be throttled back, at least a bit, by getting discounts. Here are the common discounts teens or your household can receive:

Good student discount - Insurers advertise discounts of anywhere from 5 to 25 percent if your young driver does well in high school or college, typically defined as obtaining a GPA of 3.0 or above or ranking in the top 20 percent of their class.

Good driver discount - Keeping a clean record will allow your child to eventually receive a good driver discount, normally of 10 to 25 percent, though insurers may require the person be licensed and with a clean license for three to five years.

Driver training discount - Some car insurance providers will offer a discount, usually between 5 to 15 percent, for driving training courses, while others do not since it is part of the licensing process. If driver education training courses don’t get your teen driver a discount, see if defensive driving or other classes will.

Low mileage discount - Discounts start at driving under 10,000 miles a year, but discounts tend to be higher if you drive less than 7,000 or 5,000 miles annually.

Monitor your teen - Teens are better drivers when they know they are being watched. You can monitor your teen by signing up for a pay-as-you-drive (PAYD) telematics program, such as Snapshot by Progressive. The telematics device you plug in your vehicle records and transmits your insured drivers’ behaviors, such as braking, miles driven, speed, and time of day the car is in use. If their driving behavior is deemed to be good, a discount will be applied. Auto-Owners insurance has a specific teen monitoring discount. Discounts vary for PAYD programs from 5 percent to 45 percent. 

New driver discount for completing a special program with insurance company - Certain car insurance companies offer discounts to teens who complete special novice driver courses. For example, Farmers has its YES program and Liberty Mutual has TeenSMART. After completing the course, you receive a discount for your teen. Discounts vary.

Family plan discount - Some auto insurers offer a discount specifically for unmarried young adults under age 21 who live with their parents. Also, some insurers give discounts for young drivers who obtain their own insurance plan with their parents' insurer.

Student away discount - If your child goes off to college more than 100 miles away from your home and without a car, many insurance companies will offer a discount. The discount varies greatly from 5 percent to up to 35 percent, depending on your insurer.

Multi-vehicle discount - When adding another car to your policy, it should be eligible for a multi-vehicle discount.

Here is a sampling of what teen discounts are being offered by car insurance companies:

Teen discounts by insurance company

Company

Teen Discounts

Insure.com's Overall Rating

 

State Farm

  • PAYD program - Drive Safe & Save
  • Auto safety features
  • Good student
  • Student away
  • Safe driver
  • Driver training (for those under age 21)

87.2

Get quote or additional information

Progressive

  • PAYD program - Snapshot
  • Good student
  • Student away
  • Minor child (for licensed child under 19 who is on parent's policy)

86.2

Get quote or additional information

Geico

  • Auto safety features
  • Good student 
  • Driver's education training
  • Safe driver
  • Family pricing (when child moves to own Geico policy)

85.7

Get quote or additional information

Nationwide

  • PAYD program - SmartRide
  • Auto safety features
  • Good student
  • Family plan
  • Student away
  • Driver safety course %

84.5

Get quote or additional information

Farmers

  • Auto safety features
  • Electronic stability control
  • Good student
  • Driver's education course
  • Student away
  • Safe driver
  • Completing Farmer's teen driver YES course
  • Youthful driver (for drivers age 25 or younger on family policy)
  • On your own (under 25 and start own policy after being on parent's Farmer's policy for at least 12 months)
  • Shared family car (If have driver age 20 or younger and household has more active drivers than vehicles. Available in Connecticut.)

81.4

Get quote or additional information

Esurance

  • PAYD  program - DriveSense
  • Auto safety features
  • Good Student
  • Student away
  • Safe driver

79.6

Get quote or additional information

Mercury

  • Auto safety features
  • Good student
  • Driver education course
  • Safe driver
  • Occasional driver

79.6

Get quote or additional information

* Discount offerings vary by state. Discounts listed based on information available on company websites as of October 2015.

Other ways to save on your car insurance policy

Pick the right car. A sports car or other high-powered vehicle is all wrong for a novice driver, and the insurance rates will back that up. A family sedan, minivan or small SUV are typically the vehicles with the best rates for teens. An older car isn’t always best, as safety features will give you discounts, and protect your teenager better if he is in an accident. Compare car insurance rates for a few cars before buying a teen a car.

Share a car with your kid. Instead of adding a new car to your household for your newly licensed driver, share one that is already on the policy. If you have three drivers and two cars, see if you can make your teen a secondary driver on the vehicles. This should cost less than him being listed as primary driver since secondary drivers aren’t expected to drive as much.

Assign your teen to the cheapest car. Some insurers automatically assign the riskiest driver to the most expensive car. If your insurance company allows you to assign drivers to cars, you can save by assigning your novice driver to the cheapest car on the policy, meaning that will be the car he drives the most. This means your child will be primarily assigned to one car and be secondary on other cars, so he can still drive all household vehicles.

Delay your teen receiving his license. The younger the driver, the higher the car insurance costs. If your teen starts the licensing process at 15 but waits until 17 to be licensed, you will not have to pay insurance costs for those two years and will pay lower rates when he is 17 than you would when he was 15 years of age.

Drop comp and collision. With a novice driver behind the wheel, keeping high-liability limits is a must since it covers injury or property damage that your teen may cause to others. But if your teen’s car isn’t worth much, consider dropping comprehensive and collision. Comp and collision cover your car, so decide if you need those coverages or if you would rather save on insurance rates by dropping them.

Raise deductibles. If you want to keep collision and comprehensive coverage on your vehicle, then think about raising your deductible, which is the amount you pay before your insurance policy kicks in to pay the remainder of your car’s repairs or total loss. Raising your collision deductible from $500 to $1,000 could save you anywhere from $50 to $200 a year, or possibly more depending on your insurance provider.

Should a teen get his own policy or go on a parent’s policy?

Putting a teen on his own policy is almost always more expensive than adding him to your existing family car insurance policy. You have discounts he can’t get, like multi-vehicle, multi-policy (if bundled with auto and home policies), longevity with carrier, homeowner, experience, and others that would take your teenager years to obtain.

Also, if you think allowing your teen to buy his own car and policy will keep you out of being accountable for his actions, think again. When you sign for his license, most states assign you the responsibility for your child as a driver. For example, in Kentucky, the application for drivers under age 18 must be signed by a parent or guardian who agrees he/she is jointly liable with the applicant for any damages.

The next issue, depending on your state’s laws, is those under the age of majority, between ages 18 and 21, cannot sign binding contracts. That means to buy a car and a car insurance policy, which is a binding contract, your teen will likely need a parent to sign with him on the paperwork.

Getting your teen his own policy is typically only a good idea if he has already racked up tickets or has been in accidents and is raising the rates on your family policy. Then, it may be time to get him an older car with just liability on his own policy.

Excluding a teen driver from parent’s policy

Excluding a household member is allowable in some states and by some insurers. You typically pay a small fee to exclude a driver from one or more of your vehicles, and in return, your car insurance company does not rate that person for the car(s). When a driver is excluded from a car, it means that there is no coverage extended to that person if he or she drives that car. 

If your teen is going to drive all the cars in your household on occasion, you wouldn’t want to exclude him.

However, if your teen driver has already been in accidents or has multiple tickets and your insurer is ready to drop you if he remains on your policy, it may be time to exclude him from your policy. This will keep your current insurer happy. Another option is to comparison shop and see if another insurer isn’t as strict about a teen’s driving record. Another insurer may allow him to be on your policy with more reasonable rates.

Another reason to exclude your young driver is if you have a specialty or expensive car to insure that your child is never going to be allowed to drive. Adding him as even a secondary driver might be a cost you don’t want to pay. Then, you can ask your insurer about excluding him from just this one vehicle. If your child is excluded, hide the keys. You don’t want him to take it out for a quick, unauthorized spin around the block, only to crash and leave you responsible for all the accident costs.

Insurance covers bad driving by teens

If your child is caught driving against his license type restrictions, such as with too many passengers or hours that he is not to be on the road, your car insurance is still intact. If your child receives a ticket for such an offense it may not be counted at all by your insurance company, or counted as a minor violation, which could possibly raise your rates based on your insurer’s surcharge schedule (their internal guidelines that is filed with the states of when to raise rates). 

If your teen was in an accident while driving against a restriction, it should be covered just as if you were in an accident due to breaking a traffic law, such as running a stop sign. That is the good news. Your child driving against restrictions and crashing would show him to be an even greater risk, and you could expect your already high car insurance rates to go up by 20 percent or more.

If your young driver gets too many tickets or is in too many accidents, then not only may your rates go up, but your car insurance company would likely not renew your policy. Shopping for a new car insurance company may actually help you save in premium costs since each insurer weighs violations, accidents and claims history, as well as age and experience, differently.

Insurance coverages your teen should have

You are legally required to have to have at least state-minimum auto insurance coverage, but that is really not going to cover your needs as a parent of a teenage driver.

First and foremost, your teen driver needs liability coverage – and lots of it. Liability coverage is what pays for damages your young driver may cause to others, either in the form of injuries or property damage. Bodily injuries can easily cost hundreds of thousands of dollars in medical treatments, so your basic state-minimum coverage could be easily surpassed even in a low-speed accident. And if your child is unlucky enough to smash into a brand new, classic, or ultra-expensive vehicle, low limits of property damage liability coverage could be exceeded. If your child takes out a fire hydrant, you can be billed for not only the cost of the repairs but also the water that was lost – which can really add up.

If your liability limits are exceeded, both you and your minor child will be responsible for paying outstanding expenses. Obtaining an umbrella policy, which can boost your liability insurance after your car insurance limits are reached, of $1 million or more is a good idea when you have a teen driver in your household.

Comprehensive and collision coverage will be required if the car your teen is driving is financed. If the car is paid for, then it’s up to you if these coverages are needed. If the car is worth a reasonable amount and you want to be able to make claims with your insurer for repairs or its total loss, then certainly carry these coverages on the vehicle. To help lower the expense, consider choosing higher deductibles. 

Raising deductibles can help your premiums a bit and also force you (or your teen driver) to pay for minor repairs. If your child hits a mailbox and causes $700 worth of damage and you have a $1,000 deductible, you don’t need to make a claim. Yes, you’re out the cost of repairs, but your insurer doesn’t know about the incident therefore won’t raise your rates due to your child’s single-car accident.

Advice for parents of novice drivers

The best way to get the best price for car insurance when a teen becomes licensed is to shop around. Your current insurance company may offer the lowest premiums for a home without young drivers but could have horrible rates for teens. When your teen is studying to take the written test for his permit, you should be studying car insurance company quotes.

When obtaining quotes, look for any and all discounts that may apply. Also, look at upping liability limits to make sure if the worst case scenario – a severe accident – is caused by your teenage driver, you will have enough insurance to cover it and won’t be sought out personally for repayment of damages.

Look into bundling auto and home insurance to get a discount and also about adding an umbrella policy. Typically, you must carry both your home and auto policies with the same insurance company to add in an umbrella policy – coverage that can add $1 to $5 million of extra liability coverage. 

Car insurance rates will go down -- eventually

Car insurance is highest during the early years of being licensed. Parents need to stress how important it is to be free from accidents and violations. As the child matures and shows to be a good driver, he can obtain a good driver discount, which can significantly help auto insurance rates. Also, auto premiums for drivers normally lower slightly each year from age 16 until age 25.

At age 25, drivers are in a new category, one where crash rates and claim payouts are less, thus annual premiums are lower. However, all other variables being equal, men can still expect to pay a higher premium than women until approximately the age of 30.

Young drivers buying own policy

Age

Female

Male

Difference

% Difference

18

$3,669

$4,441

$772

19%

19

$2,550

$3,133

$583

21%

20

$2,294

$2,804

$510

20%

21

$1,890

$2,236

$346

17%

22

$1,746

$2,020

$274

15%

23

$1,625

$1,861

$236

14%

24

$1,549

$1,746

$197

12%

25

$1,381

$1,455

$74

5%

* Obtaining own policy at this age on a 2015 Honda Accord LX with 100/300/100 liability coverages and comprehensive and collision coverage with $500 deductible

Taking time to understand the process of insuring a teen will give you the confidence to research multiple quotes and understand the coverage options available. You’ll have peace of mind knowing the ins and outs of your selected policy and how it works to protect your family. The expense might be unavoidable, but feeling like you're in the driver's seat of your policy is absolutely something you can control.

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