|Insuring your teen driver without breaking
Many teenagers count the days until they can get behind the wheel
of the family car and cruise. Many of their parents count the days,
too, but for entirely different reasons.
For the teens, it means freedom and fun. For their
parents, it means sleepless nights and lighter wallets.
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 not unheard of, says Loretta Worters, spokeswoman
with the New York-based trade group Insurance Information Institute.
Fortunately, you can take steps to rein in pemium
Comparison shop for teen-driver prices, says Lewis Mandell, professor
of finance at the University of Buffalo, in Buffalo, N.Y. While
rates for 40-somethings may be fairly standard among insurers, that's
not always the case with younger drivers, he says.
You'll also want to evaluate taking out a separate
policy for your teen.
Assuming you and your spouse have a good claims record,
you're probably best off simply adding your teen driver to your
own policy and paying the increased premium, says Robert Klein,
director of the Center for Risk Management and Insurance Research
at Georgia State University in Atlanta.
On the other hand, if your driving record leaves a
lot to be desired 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 just when your
insurer classifies young drivers as adults. At that point, you should
see a decrease in your rates, says Gwen Reichbach, director of the
National Institute for Consumer Education at Eastern Michigan University.
While many 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.
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, says Mandell of the University of Buffalo.
"Typically, parents have more assets, so they
take greater responsibility," he says.
Thus, insurers are likely to charge a lower premium.
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 warned, however: Many insurers will not assign
certain cars to certain drivers; they assume anyone in the house
can drive any of the cars.
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.
Making the grade
Let your insurance company know if your child has a B or better
grade average. Studies have shown a correlation between good students
and responsible drivers, so many insurers offer good-student discounts,
which typically range from 5 percent to 10 percent, says Madelyn
Flannagan, vice president of education and research with the Independent
Insurance Agents of America, an Alexandria, Va.-based professional
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. (In some states, teens must take a driver's education
course to get a license at age 16; otherwise, they have to wait
until they're 18.)
Such courses can be good for discounts of up to 15
percent, says Worters. Just make sure the course you have in mind
is approved by your insurer.
In addition, some insurers offer "safe driver
programs." Teen participants in these programs sign contracts
stating that they won't, for instance, 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.
Currently, about two-thirds of states have 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
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 who
don't have a car on campus, says Worters of the Insurance Information
What not to do
As you're checking out insurance for your teen driver, you'll want
to avoid these mistakes.
First, don't procrastinate. 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 generally will cover it, says Worters.
However, it can retroactively charge the higher premium
that you should have been paying. In an extreme case, it could revoke
You also don't want to drastically lower your liability
coverage in order to reduce your rate increase, says Klein. Granted,
doing so may save a few dollars now. 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.
Ultimately, 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
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.
-- Posted: April 17, 2002