New drivers are expensive to insure, as any teen or parent of a teen finds out in a hurry. In fact, young adult drivers between the ages of 16 and 25 pay the highest premiums of any age group in the country, especially the 16 to 19 year olds.
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There are ways to lower the cost of insuring these young drivers, though the premiums will still remain higher than their parents’. Keep reading for tips on how you can lower premium costs for your young driver.
Add to Parents’ Policy
It is almost always cheaper for a young driver to be added to his parents’ policy than it is to get him his own. This allows the teen to take advantage of some of the benefits mom and dad enjoy on their insurance.
For example, since many people buy their homeowner’s and car insurance from the same company, they get a good discount on both. By adding a new driver onto the existing policy, the young driver can indirectly benefit.
Also, one of the factors insurance companies use to calculate your premium is your credit score. Since most young drivers don’t have a credit history of any kind, they can’t use this to see that the teen is responsible. By becoming another driver on the parents’ policy, the parents’ credit is used as the factor on the policy.
The insurance for a new driver is lowest when he is only a secondary driver on his parents’ vehicles. Since someone else is driving the car most of the time, the risk is lower. So to keep costs the absolute lowest they can be, don’t get a car for your new driver until you have to.
Choose a Car Carefully
If you do choose to buy your young driver a car of his own, choose a car that will keep his insurance down. The Insurance Information Institute or III also says to look for a safe car. There are many ways to do this.
First, don’t buy a two-door vehicle. Two-door coupes are considered sports cars by insurance companies. Sports cars are much more expensive to insure than any other type of vehicle. Since they are considered fast cars, it is assumed they are bought to drive fast. So no matter how cool the cars are, if you are trying to keep costs down, look for a sedan, truck, or SUV.
Also keep in mind that the more expensive the car is, the more the insurance will be because it will be more expensive to replace in case of a total loss. Thus, the best bet for a teen is a used car.
Even with a used car, look for safety features and anti-theft devices. Features like airbags and anti-lock brakes will not only keep your child safer on the road, but will garner discounts from the insurance company. Anti-theft devices like car alarms and engine immobilizers are loved by insurance companies. If you have a monitoring or locating system, that’s even better.
To keep insurance costs at their lowest, get him an older car that you don’t need to carry comp and collision on. If it is old enough that you could afford to replace it if needed, then drop the comp and collision, which is a major part of the cost.
Get Good Grades
Young drivers can help themselves by getting good grades. While most young drivers don’t have any credit history to show responsibility, they can show it by being responsible in the classroom. Nearly all insurance companies reward students who makes As and Bs by giving them a good student discount on their insurance.
If your high school student has a driver’s license but doesn’t drive himself to school every day, be sure to tell the insurance company this. Whether he takes the bus, you drop him off because you need the car, or he’s home schooled, if he’s not making this daily commute, it might let the insurance company take more off the premium. Emphasize that this means he’s not spending part of each day driving around other young, inexperienced drivers.
If you have a college student whose school is over 100 miles away without a car, inform the insurance company. You’ll still need to carry insurance on him, but the price should go down since he’ll only be driving on the occasions when he is home.
Take a Safe Driving Course
The Insurance Institute for Highway Safety says that the accident rate resulting in a fatality is three times higher for teens than it is for any other group. This makes automobile accidents the leading killer of teens in the country. It also results in the highest insurance costs.
One way to lower the chances of your teen being in an accident is enrolling him in a special driver’s safety course designed just for teens. Some insurance companies offer their own courses. You can also find online or local courses by searching the internet.
These should not be confused with the driver’s education classes required to get the license in the first place. These are courses structured to help further educate teens on the skills needed for safe driving. Upon completion of one of these courses, notify the insurance company. Most of them will give him a discount similar to what you might receive if you took a defensive driving course.
One way states have tried to combat the high accident and fatality rate for teen drivers is to institute a graduated licensing program. In this program, young drivers are gradually given full driving privileges, rather than getting them all at 16. States with this program have seen a drop in fatal accidents among teens of 20% to 40%.
In this program, they must hold a permit for six to twelve months before getting a license. Even then, they can’t drive after a certain hour and are restricted to the number of non-family members who can be in the car, usually to only one.
Even if your state does not have a graduated licensing program, the National Safety Council suggests instituting the same guidelines in your home. While it might not save you money on your insurance immediately, if you can help your teen avoid accidents, eventually it will drop as he proves to be a safe driver.
Choose a Higher Deductible
Another way to combat the overall hike in insurance premiums that comes with adding that new driver is to raise your deductible on all the cars on the policy. Even if your teen never drives a particular vehicle, consider raising the deductible on all of them as high as possible.
The deductible is the amount of money you agree to pay towards repairing your car after an accident that is your fault, or the fault of anyone on the policy. So the more you agree to pay, the less the insurance company will charge you for that coverage.
This is also the amount you’ll have to pay towards replacing the car if it is totaled. If a $5,000 vehicle is totaled, and you have a $500 deductible, then the insurance company would pay you $4,500 toward replacing it.
Since adding a teen driver can raise your premiums from 50% to over 100%, anything you can do to chip away at the cost can certainly help. So if your deductible is set at $250 or $500, consider raising it to $1,000. This could lower your premium by hundreds of dollars over the course of a year.
Just be sure to put $1,000 into an account that earns interest. Don’t touch until you need it for the deductible, because you don’t want to be caught needing your car but not having the money to get it out of the shop. By setting the money aside, you can freely enjoy the savings the higher deductible can bring.
Get Multiple Quotes
No matter whether you have a teen or young adult driver on your insurance or not, it is a good idea to review your policy once a year and shop around to see if you can get a lower price elsewhere, says the National Association of Insurance Commissioners.
Car insurance is a very competitive business. Not only that, but the companies don’t come up with the cost of the premium in the exact same way. They each have their own formula or method to compute the baseline cost. They may give different amounts for the same type of discount. Some may charge more for young drivers than others may.
So it makes sense to take the time to get quotes from more than one company before purchasing a policy. Quotes for the exact same coverage for the same people and vehicles can vary by hundreds of dollars. You won’t know that you are getting the best deal until you compare it to others.
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