Money Saving Tips for Parents of Teen Drivers
Once the excitement of your teen driver getting his license wears off, reality hits and you ask the important question- “How much is it going to cost to insure my newly licensed teen driver?”
And there’s no easy way to say this, so I’ll just say it- it’s expensive. Teen drivers can easily cost 2-3 times that of an adult driver. The reasons are many, including severity and frequency of accidents, but this is a cold, hard fact. So while parents can’t do anything about the data that drives the rates, there are several things they can do to help lessen the financial impact when adding the teen driver to their car insurance.
Many insurance companies will not require a teen driver be added to the policy until he has his license
In Ohio, 15 1/2 is the minimum age to get a learner’s permit. The restrictions are very substantial though (limitation on number of passengers, no driving after a certain time, etc.), so several of our companies have decided to forgo charging premium when drivers are in the permit stage. Imagine buying a few extra months of not having to pay premium for your kid to drive. Would that help your budget? If you’ve been having nightmares about the cost of insurance for your teen driver, ask your insurance agent if your insurance company has a similar provision.
Kids rated as occasional operators are usually not as expensive as those that are rated as principal operators.
HOWEVER, there are rules for rating as principal vs. occasional. Here’s a few examples:
The Jones family has 3 drivers, Dad, Mom & Junior. They also have 3 vehicles. An equal number of vehicles and drivers means each person is rated as a principal operator on a vehicle.
The Smith family has 3 drivers, but only 2 vehicles. The adult operators are assigned first, one to each vehicle and then Jr. is allowed to be rated as an occasional operator on a vehicle. The theory is that 3 people can’t all be driving 2 cars at the same time.
So the number of drivers and number of vehicles determines how the teen driver is rated.
If cost is the overriding factor, then perhaps it may be more economical for Junior to go without his own vehicle for a while.
The Good Student discount can save you some serious $$
Ask your insurance company if they offer this discount (not all do). Rule of thumb- if your kid gets a 3.0 or better GPA in school, you could probably save between $75-$100 every six months. If your kid is contributing any portion of the premium, this is added incentive to get good grades.
If your kids are going away to college, seriously consider NOT letting them take a vehicle
With several of our companies, if a kid is at a college over 100 miles from home, with NO vehicle, then there’s a pretty sizeable discount offered. In fact, they’re often rated as married, which gets one of the lowest rates. Again, if cost is a consideration, this is just another way to give your cash flow a boost. Ask your company if this is an option.
The BEST type of vehicle you can buy for your teen driver is one that needs liability only
Along with safety ratings, whether you need liability only or liability PLUS comprehensive and collision will determine the best type of vehicle for your teenage driver. First, a quick review of three terms crucial to this discussion- liability, comprehensive (sometimes referred to as “other than collision”) and collision.
Liability- covers the other guy for bodily injury and property damage. Example- you hit another car. The liability pays to fix the car and pays medical bills for the other driver.
Comprehensive- covers damage to YOUR car. Examples include: glass breakage, animal hits, vandalism, theft, fire, falling objects.
Collision- covers damage to your car for other “stuff” that can happen to your car that isn’t covered under comprehensive. Examples include: hitting a tree or another vehicle.
Most important: the premium for the comprehensive and collision coverage is specific to a vehicle (meaning what you buy has a huge impact on your premium) and can sometimes be greater than the liability portion. Insurance companies use rating symbols to calculate the cost to insure a particular vehicle (these symbols have generally been standardized within the industry). The higher the symbol, the more expensive the premium.
We’ve seen situations where including comprehensive and collision on a vehicle a teen driver is driving DOUBLES or TRIPLES the premium. So, it’s best to have your agent quote your teen driver on a specific vehicle and you can see the cost for yourself. You can then decide if paying the premium justifies the ability to get the car fixed by the insurance company if there’s a claim or the value of the vehicle if it’s totaled in a claim.
