Top Strategies for Saving on Car Insurance for Teens
When your teenager sat behind the wheel of a car for the first time, you could probably just feel hairs on your head turning gray.
Learning how much your car insurance rates will increase with that new driver on board, though, will make that moment feel like a cakewalk.
There’s no doubt about it: Insuring a teen driver is expensive.
Short of banning them from driving entirely, though, what’s a parent to do?
After all, there’s a lot to love about having a kid who can drive themselves around. Besides, they have to start sometime – why delay the inevitable?
Insuring a teen driver is pricey, but there are ways to make it more affordable.
The earlier you familiarize yourself with these strategies, the likelier you’ll be to avoid paying an arm and a leg to keep your kid behind the wheel.
Why Does Car Insurance for Teens Cost So Much?
It’s easy to feel like auto insurers take advantage of parents by charging exorbitant rates for teen auto insurance, but they have plenty of good reasons for doing so. After all, insurance rates are based on risk – and teen drivers are by far the riskiest out there.
Consider this: During their first year of driving, one out of five 16-year-old drivers is involved in an accident.
Or this: 16-year-olds are 20 times more likely to die in a car crash than adult drivers.
And especially this: Every day, seven teenagers die in car crashes in the U.S.
Teens are riskier drivers – and more expensive to insure – for all kinds of reasons, including:
Good Car Insurance for Teens Can’t be That Expensive – Can It?
Like any parent with a child about to get behind the wheel, you probably hit panic mode upon realizing what a dent the new driver would put in your budget.
Parents of teen drivers often bemoan the sudden spike in premiums they face after adding their children to their policies, so it’s a common fear.
In fact, it may lead you to wonder: Could insuring my teen cost less if they had their own auto insurance policy?
Here’s a quick answer: Absolutely not.
The average price for a teenager to obtain their own car insurance policy is upwards of $5,000 per year.
Sadly, adding them to your policy isn’t exactly affordable, either. On average, adding a 16-year-old driver to an existing car insurance policy increases the premium by 130% to 140%, or by an average of $2,000 per year. In other words, if you currently pay $800 per year for coverage, your annual cost will increase by $1,120 to $1,280 per year.
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5 Ways to Pay Less for Teenage Car Insurance
Don’t wait until your kid has their learner’s permit to investigate car insurance options. By learning a few strategies to save on the average cost of car insurance for teens, you are certain to save big.
We’ve compiled five of the best ways to reduce the cost of car insurance for new drivers. Without further ado:
1. Make Them Wait Longer to Start Driving
We put this one first because we know it isn’t a practical choice for many families. However, one of the best ways to save on auto insurance for a teen driver is by having them wait a while longer to start driving.
Sure, your teen will be chomping at the bit to get their license right on their 16th birthday – but insurance rates for drivers aged 18 and 19 years old are, on average, 20 percent lower.
Of course, having to wait a few more years means having to play chauffeur for that much longer – and that alone can be incentive enough to face the (expensive) music.
2. Raise Your Car Insurance Deductible
One sure-fire way to slash your monthly premium is by increasing your auto insurance deductible. Increasing it from $500 to $1,000 can reduce your annual premium by around $400, but you have to keep practical considerations in mind.
In particular: With a teen behind the wheel, your odds of having to fork over that premium rise dramatically.
Another point: The amount you will “save” by adopting this strategy will still be overshadowed by how much your rates will increase with a young driver behind the wheel.
A similar idea is to drop comprehensive and collision coverage if the car is not financed or worth very much. Again, though, teen drivers are far more likely to be involved in crashes, so you are apt to end up paying more in the long run if the worst happens.
3. Sign Up Your Teen for Driver’s Safety
Teen drivers in all 50 states must complete driver’s training programs to obtain their driver’s licenses.
Did you know, though, that there are tons of optional driver’s safety courses out there that can help you slash auto insurance rates for teens?
Also known as safe-driving courses, or defensive driving courses, driver’s safety courses are designed to keep drivers’ skills in check for optimal safety when behind the wheel.
Over the course of four-to-eight hours of instruction, on average, students learn more about topics like local driving laws, safe driving techniques, and basic safety information.
Upon completion, a certificate is issued to the driver, which can then be presented to their insurance company for a discount.
Most car insurance companies offer some type of discount for drivers who complete such courses. Such discounts are often only available to drivers under age 25 or over age 60 since those age groups are considered to include the riskiest drivers.
The discount that you get varies depending on the insurance company, the state you live in, and other factors. On average, though, they range from 5% to 20%, and the discount is usually applied for three to five years. In most cases, the course can be retaken at that point so the discount continues.
Some states have official programs in place to encourage defensive or safe driving. New York’s defensive driving course, Internet Point and Insurance Reduction Program, or IPIRP, provides a mandatory 10% discount for a period of three years. The internet-based course is available to drivers of all ages.
Across the U.S., safe-driving courses are often sponsored by organizations like AAA and the AARP. Different insurers offer different discounts for drivers who complete such courses. Here are some average discounts for a few insurance companies:
4. Get Paid for Good Grades
Whether your young driver is in high school or college, good grades can help offset the increases that go along with having a teen behind the wheel. The vast majority of insurers offer good student discounts, but they don’t just apply them automatically – you have to be proactive and ask for it.
On average, good driver discount programs offer discounts of around 7%, but discounts can go as high as 25%, depending on the insurer. Most companies aren’t very straightforward about their good student discounts because they vary depending on how good the grades are and other factors. Usually, though, students need a B average or better to qualify.
Be prepared to provide proof of your student’s grades – and to do so every year, on average, to maintain the discount.
The way insurance companies see it, good students are more likely to be safe, conscientious drivers. Some examples of programs that are offered include:
- Allstate’s Smart Student discount is available to students under age 25 who maintain a B average, or a GPA of 2.7 or higher.
- Geico offers a discount of 15% for students who maintain a B average or better; extra discounts may apply for members of fraternities, sororities, or honor societies.
- State Farm offers a discount of up to 25% for good students not only while they’re still in college but up to age 25 after graduation.
5. Sign Up for a Telematics-Based Policy
An increasingly popular way to keep car insurance rates in check is by agreeing to have a device plugged into your car to monitor your driving habits. It’s also a good way to slash car insurance rates for teen drivers.
These days, nine out of 10 insurers offer some type of pay-as-you-drive, or PAYD, program, which uses either a plug-in device or a smartphone app to monitor driving habits. Such programs track metrics like rapid acceleration, hard braking, daily mileage, and time of day driving to assess overall safety, and insurance companies then base premiums largely off of this data.
If your teen is a safe driver – and that’s a big if – signing up for a program like this can help you save hundreds on car insurance per year. Some examples of popular programs include:
What's a reasonable car insurance rate for a new driver?
There are two factors that come into play with car insurance rates. 1. The driver - age, gender, marital status, driving history and credit history (if they are buying their own policy). 2. The vehicle - year, make, model, coverages.
Once we know those two factors we can then determine the approximate cost of insurance.
For this example we will assume we are working with a new or teenage driver.
If the insurance is a 16-year-old male with a liability only vehicle you could expect to pay anywhere between $100 and $200 per month for this individual on car insurance. That's also assuming they will be listed on a parents policy with more drivers than vehicles. If the 16-year-old has their own vehicle with full-time availability the rates may be higher.
The same driver with comprehensive and collision coverage will pay an additional $100 to $200 on top of the baseline liability policy for these coverages - assuming a $500 deductible for both comp and collision.
Females with the same age and driving experience will pay 25% to 40% less.
But Wait – There’s More!
Honorable mentions that didn’t quite make the list above include buying your teen an older – but safe – car to drive, which is cheaper to insure than a new one; getting a student “away” discount if your kid goes away for school and making sure that you are getting all of the discounts to which you are entitled, including multiple-vehicle discounts and bundle discounts for, say, auto insurance and homeowner’s insurance.
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It’s Not Forever
Even after getting every discount that you can, your car insurance rates will be higher for some time with a young driver around. Just remember: It’s not permanent. After three years of safe driving, in fact, insurance rates drop by an average of 50%; after six years, they drop again. In other words, just hang in there!