7 Ways to Save on Car Insurance When Adding a Teen to Your Policy
After my last post, Got Teen Boys? It’s Gonna Cost You, I heard from many readers who also felt the pain of teen drivers. We shelled out nearly $7500 during the first year when our 2 teen boys started driving. But rather than wallow in self-pity, I decided to follow up with 7 ways to lessen the pain.
According to research from insurance.com, adding a 16-year old driver to the average household’s automobile insurance policy increased the annual premium by a whopping 52%. Teen boys cost the most, the average bill rose by 76%. Comparatively, teen girls were a real bargain – ONLY increasing the bill by 29%.
While there’s no escaping paying more for insurance when the kids are added to the policy, there are some ways you can reduce the overall impact to your wallet.
1. Make sure the kids are invested – There’s no better way to make sure your kids take their new driving responsibilities more seriously than having a little skin in the game. If your teen driver knows they’re on the hook for the car, maybe they’ll think twice before going just a little over the speed limit.
In theory, this is the best advice around. I say in theory, because it didn’t work so well for us. Our oldest son works part-time in retail. He got this job when my husband and I told him that we would match any money (up to $4000) to buy a car. Well, the kid worked really hard. And he bought a 2004 Nissan Pathfinder. Okay, so he bought my husband’s old car, but that’s a minor detail. He took great pride in that car and we thought this would help him steer clear of any accidents. Unfortunately, this kid made a poor decision and wrecked the car. TWICE. Yep, once for following too close and once for making an illegal U-turn.
2. Ask for a discount – Most insurance companies offer a discount for teens who complete a driver’s education course. There are also discounts for good students (typically a 3.0 GPA or higher.) Although the discounts vary by insurer, the good student discount averages 12% nationwide.
In theory, a driver’s education course will make your teen a safer driver. I say in theory, because our oldest kid (you know, the one who had 2 wrecks) took a driver’s ed course and we did get the reduction on the premium. Did the course make him a safer driver? Well, I’d hate to think how many accidents would have occurred if he had not taken the class.
3. Delay getting the license – Probably not the most popular option with your teenager, but every year you delay insurance increases your savings. Typically, insurance rates return to normal once your kid reaches 21.
4. Bundle insurance with the same carrier – Companies often offer their clients a multi-line discount when the client carries home and auto insurance with the same company.
5. Increase the deductible – Raising your deductible from $500 to $1000 can decrease your annual premium by as much as $400, according to insurance.com.
6. Drop collision coverage on an older car – If your car is a beater, consider dropping the collision coverage. For example, if your car is worth $2000 and you’re paying $800 each year to carry collision coverage, then it will take 2 ½ years to break even. If the car is not damaged during the 2 ½ years, then you’re better off financially to have dropped the coverage. Do the math. And never, ever drop liability coverage.
When the Pathfinder was totaled in a wreck, we used the loss settlement to purchase a 2006 Nissan Altima. We do not carry collision insurance on the Altima, which saves us $700 per year. So far, good decision.
7. Request occasional driver status – According to the Insurance Bureau of Canada, occasional drivers are added to conventional policies after the named principal driver. Although the occasional driver is allowed to legally drive the car, the premium will be less than if the teen was named as a principal driver.
And a final word – consider umbrella insurance. Now is the time to review your own insurance policies to make sure that your assets are fully protected. At the end of the day, the policy is yours – not your teen’s – which means all household assets can be considered fair game in a lawsuit. This extra liability insurance provides coverage above the limits of your auto and home polices and is designed to protect you from major claims and lawsuits.
Just before our latest trip to the US, I elected to get umbrella insurance. I am so thankful I made that decision. Did I mention that the wreck in the US involved a pregnant woman? Yes, a woman who was 7 months pregnant hit my son because he was pulled out too far in one lane after making the illegal U-turn. Fortunately, she was fine and the baby was fine. But, we live in a litigious society, where even the smallest of fender-benders can cost big bucks if you get sued. When it comes to teens and driving, better safe than sorry.