Teens and Auto Insurance, Leverage Discounts But Don’t Scrimp on Coverage

Our auto insurance policy renewal arrived in the mail last week — ouch!

Adding our newly licensed 17-year-old son to our policy now means we’re paying an additional $865 over the next 12 months. I know teens have the highest crash risk of any age group on the road and I want to make sure that we’re fully covered in the event he’s involved in a crash, but that does smart.

We’re lucky — our policy only increased 41.4 percent and we insure three vehicles (two cars and a truck). According to insurance.com, the average cost to add a teen to an auto insurance policy in a one-car household is 44 percent.  Insure two cars and you’ll pay an average of 58 percent. If you’ve got three vehicles on your policy, you’re talking an average increase of 62 percent.

So what’s a family to do? In our case, we asked our insurance company — Teachers Insurance (a subsidy of Plymouth Rock) -- about all applicable discounts including good student (B average) and driver training. The customer car representative was friendly and helpful, but pointed out these discounts aren’t available since the program we’re insured under already gives significant discounts to teachers (my husband). I’m bummed, but understand.

We do pay lower rates than many of our friends (I’ve checked), so I really can’t complain. But if you’ll be adding a teen to your policy ask your insurance company how you can get the lowest rates possible. In addition to the discounts I referenced above, ask if your insurer offers safe driver programs. These may include attending a parent-teen education class, signing a parent-teen safe driving agreement or participating in a defensive driving or advanced driving program.

If your teen will only be driving one car, tell your insurer so that your premium is calculated based on that vehicle (hopefully the least expensive one). That’s not the case in our house where we’re sharing vehicles (currently our son only drives the cars and not the truck) and that does make a difference when it comes to your premium. Many insurance companies don’t assign drivers to cars rather they assume that everyone in the household will drive all of the insured vehicles. This, according to the Independent Insurance Agents and Brokers of America, is likely to result in the insurer pricing the premium based on the highest risk vehicle on your policy.

What else can you do to lessen the financial burden of adding a teen to your policy?

Some insurance experts recommend raising your comprehensive and collision deductibles to at least $1,000.

We’re sticking with $500 for now. We did, however, drop the collision and comprehensive coverage on our 10-year truck, which has served us well (216,000 miles and counting).

If you’ve got an older/high mileage vehicle, consult the Kelley Blue Book to see what it’s worth. You might just be paying more in premium than the vehicle’s actual value. Resist the urge to lower your premiums by reducing liability coverage. Experts recommend liability limits of at least $250,00 per person, $300,000-500,000 per crash and $100,000 for property damage.

What your teen drives also matters, so opt for the safest vehicle. We’ve got a 2011 Ford Fusion and a 2011 Ford Escape that are both loaded with all of the latest safety features including advanced traction and stability control.

If you’re thinking about buying your teen a car or he’s saving for one, check safety ratings compiled by the Insurance Institute for Highway Safety first.  The safer the car, the lower your premiums.

Some parents have told me they’ve considered having their teen obtain his own auto insurance policy.

I know my son doesn’t have the resources, nor is it necessary because he doesn’t have his own car. What do they experts suggest? Insurance.com found that the average annual rate quoted for a teen driver with his own policy is $2,267 (includes all liability coverage levels).

Compare that to an average cost increase of $621 to add a teen to his parents’ policy (one car household) and you’re talking a difference of $1,646.

Before I got off the phone with our insurance company, I asked the representative what happens next fall when our son goes off to college. 

“I know some companies offer a discount if your child attends school more than 100 miles from home and doesn’t take a car,” I said. “Yes, that discount we do offer,” she replied. “Just give us a call before he’s set to leave — we don’t need you to send us anything — and we’ll make the adjustment.”

Knowing that our son is looking at schools an average drive of 4½ hours from home, I have a feeling we’ll be taking advantage of this discount. For now, though, we’re doing everything in our power to help him build skill and remain crash-free. He knows that if you gets a ticket it’s his responsibility and that any violation or crash directly affects our family’s pocketbook.