For teenagers, getting a driver's license is a rite of passage. But before teens hit the road, they have another hurdle: car insurance and the high cost of premiums. "Everybody realizes they will have sticker shock when they go to insure their teens," says Carole Walker, executive director of the Rocky Mountain Insurance Information Association.
Why does adding a teenage driver to a car insurance policy cause premiums to skyrocket? Because insurers know teens are less experienced, take more risks and are more likely to be involved in fatal crashes. "Unfortunately for teens, their inexperience and immaturity has made them statistically the most high-risk group of all risk groups," Walker says. "A 16-year-old driver is up to three times more likely to be in a crash than a 20-year old. Because of this, they are the most expensive group to insure."
How to cut costs
The good news: You can take steps to protect your young driver while reducing the financial pain of a new premium. For starters, Walker recommends adding your teen to your own policy. You can save money by raising the deductible on your policy, but consumer advocates warn against cutting back on liability protection. Good liability insurance is just too important when there's a young, inexperienced driver behind the wheel.
When choosing that policy, it pays to compare. According to MoneyGeek's analysis of car insurance in 50 states and DC supplied by the data firm Quadrant, the median yearly premium increase for a couple with two cars and a teen in California in 2016 was $2,276. But the costs varied dramatically. In a point-by-point comparison of 3,600 policies, the highest cost for adding a teen to an auto policy was $14,445. The lowest yearly increase? Just $217.
The car matters, too. Your teen may have her heart set on a sports car or SUV, but avoid these if you want to keep premiums under control. Insurance companies charge more a lot more for some of those models. Keep in mind that insurers look at the highest-risk car in your household when assigning risk, so if you have a sports car it will drive up the premium, even if your teen is driving the minivan. "Because they are living in your household, the insurance company will assume they have access to that car and will take that into consideration," says Walker.
But don't choose just any old clunker for your child, warns Walker. "Many older vehicles don't have the technology and crash worthiness of newer vehicles, so they won't get the best rates," she notes. She recommends consulting the Insurance Institute for Highway Safety's Top Safety Picks. "They have recommendations for lower cost and used vehicles that could save you money on your insurance."
Many insurers offer "Good Student" discounts for students who maintain a B average or higher. These discounts are often about 10 percent, but in some cases can be as high as 25 percent, according to the Rocky Mountain Insurance Information Association. Also look for discounts for teens taking a defensive driving course or a driver's ed program. These courses may be offered in your child's high school or online.
But check with your insurance company first before signing up for a class, advises Walker. "Don't assume your insurance will give a discount on your driver's ed program," she says. "Many companies require you to go through their course or use their technology, so check with them before you sign up."
The cost of unsafe driving
Always stress the importance of safe and careful driving. You teen's safety comes first, of course, but any mishap or infraction can also be extremely costly. In California, if your son gets even one speeding ticket, expect your premium to jump by an average of $1,242. If your daughter is caught speeding, it will increase less an average of $904 a year.
But this is all small change compared to a DUI, which will drive up your rates for years to come. In California, the extra insurance you'll pay over a 13-year period climbs to $40,0000, according to state government figures. Nearly every state has laws against texting while driving, too, and some involve hefty fines or worse. Make sure your teen knows the laws in your state. Until recently in Alaska, for example, a first citation for texting while driving could result in a $10,000 fine and a year in jail.
Many experts also recommend signing a contract with your teen before she gets her license, so that everyone including parents is clear about their commitments. The CDC offers a sample contract that you can use with your teen.
One of the most important things you can do is model safe driving practices for your teen. "Practice what you preach," says Stephen Gray Wallace, director of the Center for Adolescent Research and Education. "Parents are the biggest influence on their child's driving behaviors. If parents are modeling good behavior, their child will more likely engage in good behaviors because they mimic those behaviors. Same is true of bad behaviors if you are texting, talking on the phone, driving aggressively, your teen is more likely to do the same."
Teens Shopping for Auto Insurance. Rocky Mountain Insurance Information Association. http://www.rmiia.org/auto/teens/Buying_Auto_Insurance.asp
afety Tips for Teen Drivers. Insurance Information Institute (III). http://www.iii.org/article/safety-tips-teen-drivers
Vehicle Top Safety Tips. Insurance Institute for Highway Safety. http://www.iihs.org/iihs/ratings/TSP-List