Agent’s Corner: How to save money on auto insurance for your teen driver
The day comes for every parent when the beautiful bundle of love you brought home from the hospital speaks those inevitable words, “Can we go to the DMV to get my permit?” In the blink of an eye your little one is now about to become a “youthful driver” that you need to insure. Here’s what you need to know to get your teen on the road.
To start: plan in advance. Call your auto insurance company and find out what their requirements are. Many car insurance companies, including states’ farm bureaus, do not insure young drivers because of the inherent risk of being newly behind the wheel. Many require that every driver on the policy have at least five years of driving experience. Other auto insurance companies will gladly add the driver, but you may decide that the premium is not affordable for your family’s budget.
While your teen is learning to drive, be sure to inform your auto insurance company that you have a “permitted driver” (meaning they have their permit, but not their license) in your household. This means that your permitted driver will be allowed to drive a vehicle listed for your household, as long as a parent or guardian is in the passenger seat. Your policy will not be financially impacted until he or she becomes a licensed driver, so make sure he or she has been added to your policy at this time.
Once your teen gets his or her license, it is generally cheaper for your family to keep all drivers on one policy, but many parents would prefer for their 16 year-old to maintain their own insurance policy. Unfortunately, the reality is that 16 year-olds cannot sign contracts, so they will be declined until they are at least 18 years of age.
It will be less expensive if you do not have a dedicated car for the youthful driver, and instead list them as an occasional driver on the cars in the household. However, if your family circumstance requires that your young driver have a car to get back and forth to school or to any extracurricular activities because of your work schedules, make sure the car is insured but not financed. In this circumstance you could keep liability only and the premium for the young driver is typically less than on a vehicle that requires full coverage. If none of these examples fit your lifestyle or budget, you may wish to exclude your youthful driver from your policy completely. Make it clear that if that person took the car without your permission, they would have no coverage whatsoever.
If you have a teenage driver living at your residence and who is legally an adult (18 years or older), he or she is able to get his or her own insurance policy while driving your vehicle. However, there is a term in the insurance world called “vicarious liability”, which means as the parent and vehicle owner, you may not be free from liability. For example, let’s assume your son has purchased insurance at the state minimum liability requirement of $25,000 per person/$50,0000 per accident. Shortly thereafter, he causes a collision in which the other driver’s injuries prevent him from returning to the quality of life he had prior to the accident. If the sum on your son’s policy does not cover damages awarded, your insurance policy and its coverages could come into play.
Parents can protect themselves by managing the insurance policy and the vehicles in the household. This does not mean that youthful drivers should not be responsible for their part of the premium. Driving is a privilege, so one suggestion is to have some “Rules of the Road” in your home to earn that privilege. For instance, a “B” average or better on grades in high school or college can amount to important discounts on a policy. So maximize the discounts in the following ways:
- Maintain good coverage. If you are a homeowner, adequately protect yourself with liability limits of $100,000 per person/$300,000 per accident and property damage at no less than $50,000. Many carriers give you a discount for proper protection.
- Make the grade, young driver! Most insurers offer discounts for good grades.
- Have your young driver get a job to help out with the premium. They will take more ownership and recognize the privilege more if they are participating in the payment of the premium.
- Driver’s education provides another discount. To use my family as an example, we did the special driver’s ed because we believed that group training was important, coupled with our day to day practice driving schedule with our son.
Lastly, set a good example. Explain to your young driver how insurance works. Make sure the policy never lapses, as this adversely affects your future premiums and your insurance score. Lapses in coverage on your vehicles can lead to forced-placed insurance by your lender and certainly increased premiums for you.