Fast facts about costs of adding a teenager to your car insurance:
- On average, insurance premiums will increase between 50-80% when adding a new driver to the coverage.
- There is a slightly larger increase in premiums if the teenager is male as opposed to female.
- Giving a teenager a “clunker” for their first car might actually increase premiums due to the likelihood of car troubles and less safety features.
Whether your teen has saved enough money to buy their first car or you’ve given them a car as a gift, it’s finally time for them to start driving. But first, your teen will need to have auto insurance. As you may have heard or experienced first hand, insuring a teenage driver is expensive. Most auto insurance providers offer higher premium quotes for drivers under the age of 19.
According to a 2020 study by Coverage, the average rate increase of pegs after adding a teen driver is about 132%. We’ve made a list of important factors to keep in mind before adding a teenage driver to your insurance and how to do it without breaking the bank. Check it out.
Things That You Should Know Before Adding a Teenage Driver to Your Car Insurance
Before asking your current insurer to add a teen driver, we’ve gathered a list of essential points for you to consider. This will help you understand how your premiums will change and what you need to be aware of to get the best policy for young drivers.
Your Rates Will Go Up — Here’s Why (and How Much)
The reason insuring teens costs so much is that they’re a riskier bet for providers. Accident rates among drivers ages 16–19 are higher than for any other age group. To insurers, that means teens are more likely to end up filing a claim and requiring an insurance payment. Charging a bigger premium for young drivers is the provider’s way of making up for those potential future payouts.
Annual car insurance premiums often increase between 55% and 82% when you add a teen driver to your policy.
When considering insurance options for your family’s newest driver, keep in mind that your current insurer might not be your cheapest choice. Every company calculates rates differently, giving weight to various things like age, location, gender and GPA. Once your current policy expires, it’s worth shopping around to see if switching companies could help you save on your family’s car insurance.
You’ll Probably Want to Increase Your Liability Insurance
If you currently carry lower liability limits than the minimum amount required in your state, we recommend reevaluating your policy when adding a teen driver to your insurance. Here’s why: car insurance with low liability limits tends to be cheap, which makes it an attractive option for anyone on a budget. However, state minimum insurance requirements are just that — minimums. They offer bare-bones coverage that often wouldn’t go far toward paying off repairs or medical bills after a severe collision. In a worst-case scenario, inadequate insurance could put your family’s assets in danger if the other person involved decides to sue for damages.
Experts recommend liability limits of at least 100/300/100 (bodily injury/total injury/property damage) when you have a teenage driver on your car insurance policy.
Accidents can happen, even with teens that have exemplary driving records. Upping your liability limits and getting a full coverage policy ensures that your insurance can do what it’s supposed to — protect your family’s finances against the unforeseen. To learn more about what full coverage looks like on car insurance and how to get it, check out this article.
Speaking of Coverage, Ask Your Agent When Your Teen Needs It
Every state has different rules about when newly-licensed drivers need to be insured. In some states, teens must be covered as soon as they get their learner’s permit. In others, you don’t need to add teen drivers until they’re fully licensed. On top of that, insurance companies often have their own guidelines for new drivers: Some will cover a teen with a learner’s permit for free, others bump your rate up right away. The best thing to do is call your current insurer, who can explain exactly when your teen needs to be insured and how much it’ll cost you.
Remember, Driver’s Education Doesn’t End When They Get Licensed
Developing responsible driving habits takes a lot of practice — far more hours than teens are able to get in their driver’s education and behind-the-wheel courses. That’s why it’s so important for parents to continue coaching their kids and encouraging good habits. Plus, helping them drive better is ultimately in your best interest: The longer your teen drives without incident, the lower your family’s insurance rates will drop over the years.If you want to teach your teen driver how to have safe driving habits, check these great resources tailored to young drivers and their parents on risk factors and tips for safe driving:
- The Insurance Information Institute’s safety tips for teen drivers
- The CDC’s teen driver fact sheets
- The USDOT packet on teen risk and safe driving
- The National Safety Council’s resources for parents of teen drivers
- An online safety course from the NSC designed specifically for parents
Four Steps to Lower Your Insurance Rates if You Are Adding a Teen Driver
A new driver in the family can be great for your calendar, but hard on your wallet. Fortunately, there are steps you can take to bring that premium back down again. Prices will still be higher than they were before you added your teen, since insuring young drivers always costs more than insuring experienced drivers, but it’s still worth being proactive to shave rates down as much as possible.
1. Take Advantage of Usage-Based Driving Programs
You might not be the kind of parent who monitors your teen’s screen time or data usage, but if you want to save money, you should be the kind of parent who monitors their kid’s driving habits. Why? Because it could save you between 5% and 30% on your car insurance premiums.
We’re talking about usage-based car insurance programs, which use tracking technology to monitor your teen’s driving habits, and then factor that data into your car insurance rates. Most big-name insurers offer these programs nowadays. The type of tracking technology used and the amount of money you can save varies by company.
Regardless of the provider, there’s a rule of thumb for usage-based insurance: if you drive safer or drive fewer miles, the more money you’ll save. This is especially relevant when it comes to teens. Young drivers are statistically far more likely to be involved in collisions. If your teen can prove that they follow the rules of the road and take precautions while driving, they’re apt to qualify for lower rates.
2. Shop Around When Your Current Policy Expires
Odds are your teen getting licensed won’t line up with your car insurance renewal date. That means you’ll be adding them to your current policy, and paying whatever rate increase the company deems fit. Sadly, you don’t have a lot of say in that. What you do have a say in is shopping around once your policy reaches its expiration date, and making sure you’re getting the best rate on your family’s auto insurance going forward.
How can you do that? Compare quotes — lots of them. Every insurance provider evaluates prices a little differently and will give your family a personalized estimate based on a unique formula. The only way to know which provider can offer you and your newly-licensed driver the best value on car insurance is by checking rates from multiple companies.
While you are shopping around for auto insurance, it might be worth checking out digital insurance companies, since there is an increasing number of people who are turning to online providers. When it comes to pricing, these companies tend to be transparent and often offer competitive rates. Some online providers even offer pay-per-mile auto insurance.
3. Look for Young Driver Discounts
While you’re exploring the best car insurance options for your family, keep an eye out for young driver discounts. Traditional insurance companies might reduce rates for drivers 18 and under, teens with a certain grade point average or college students that live on campus and won’t be using a car too often. Many insurance companies offer a “student away at college” discount, which lowers rates for teens who go to school more than 100 miles away from home and won’t be using the family car very often. Be sure to let your insurer know if your teen lives on campus — and keep them in the loop about other big changes in driving habits. If you can prove that your teen will not be using a car too often, you might qualify for a rate drop.
Bear in mind that no two insurance companies have the same discount selections, so be sure to ask about young driver discounts while you’re checking quotes and find a company with generous savings.
Here is a list of common discounts available for young drivers:
- Teen discount (for drivers 18 years or younger)
- Good student discount (usually for a “B” average or higher)
- Student away at college discount (age restrictions apply)
- Driver training or safety course completion discount
- Student org or honor society member discount
4. Reevaluate Coverage on “Clunker” Cars
You’ve probably spent a while preparing or steeling yourself for the day your teen gets their driver’s license. Maybe you even kept an old “beater” car in the driveway, thinking it would be a great starter vehicle. When the time does come to hand over the keys, it might be worth reevaluating coverage on that clunker. This will help you make sure you’re not paying more than necessary to insure it. Does that car need comprehensive coverage?
If the deductible on your collision and comprehensive coverage is approaching your vehicle’s total value, it might be time to scale back your policy.
We typically recommend buying auto insurance with “full coverage” — meaning it includes generous liability limits as well as collision and comprehensive coverage to protect you no matter what happens. There’s just one big exception to that rule. If your vehicle has depreciated over the years, and its overall value is starting to level out with your deductible, it might not be worth paying extra on your policy for collision and comprehensive insurance.
Here’s why: Although these coverages are valuable, they pay to repair your car after it’s damaged, unlike liability insurance, they also tend to be pricey add-ons. In fact, collision and comprehensive nearly double annual premiums on average. Also, keep in mind that collision and comprehensive insurance charge a deductible of $500 or $1,000. Taking this into consideration, it doesn’t make much sense to pay for the extra coverage on a car that you’re more likely to replace than repair after an accident.
This graphic explains the difference between liability coverage versus comprehensive and collision coverage. Understanding how much money you can save by getting rid of the unnecessary premiums comes in handy when you are on a budget.
Premiums aren’t the only thing to consider before adding a teen driver to your car insurance policy. You should not forget to shop around to find the best auto insurance rates for your family. If you’re at that stage, check out our review of the best cheap auto insurance for some reliable, affordable companies worth getting quotes from.