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Getting a driver’s license is an exciting event in the lives of both the teen and his parents. But with that event comes the cost of insuring that new driver, which is not cheap.
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So what kind of car insurance is the best for teenagers? It depends a bit upon your family circumstances and finances, but there are some guidelines you can follow to make sure you and your teen are fully covered and that you are getting the best deal financially.
Adding the Teen to Your Policy
Except in very special circumstances, it is best to add the teen to your insurance rather than having him get his own separate policy. The only time this isn’t the case is when the parents have very expensive cars, and the insurance company won’t allow you to assign drivers to specific cars. This is a rare circumstance.
For most of us, adding the teen to the existing policy makes much more sense. Be prepared for a bit of sticker shock, however. Adding a new teen to your policy can easily double the premium or more.
There are some benefits to adding the teen to your policy. If the teen has his own car, then there will be a multi-car discount applied to the policy. The teen can also indirectly benefit from other discounts on the policy, like if the home is insured from the same company. This is something the teen on his own couldn’t get on a separate policy.
Be sure you understand how the insurance company assigns drivers to the cars on the policy. If there are more drivers than cars, most insurance companies will allow you to assign a primary driver to each, and allow the teen to be a secondary driver. This is usually the least expensive option.
However, if you own three vehicles and there are three drivers in the house, mom, dad, and the teen – the insurance company will assign a driver to each car. Make sure your teen is assigned to the least expensive one to insure for the lowest cost.
Also, ask if the assignments mean there are restrictions. Sometimes, if you assign the teen to the least expensive car that is the only one he’s insured on, even if there is an emergency. If you want him to have the freedom to drive all the cars in the household if needed, make sure your policy specifies this.
Don’t Skimp on Liability
While cutting back on liability might seem like a good way to save money, this is definitely not the time to do it. In fact the Insurance Information Institute, suggests raising your liability coverage when you add a teen to your policy.
Teenaged drivers have the highest crash incidents of any driver group, and the highest fatality rate. This high risk of being involved in a traffic accident means that your insurance policy is more likely to be called on to pay for damages the teen has caused.
Remember that you will be financially liable for damages your teen causes. Thus the III suggests raising your injury liability to the 100/300/50 level, which will cover most accidents. They further suggest looking into an umbrella liability policy. This kind of policy is a secondary coverage, which goes into effect once your primary policy, either car or homeowner’s has been exhausted.
Consider Personal Injury Protection
Unfortunately, inexperienced teen drivers often pay for their mistakes with their lives. The Insurance Institute for Highway Safety or III says this: The statistics for deaths due to traffic accidents in drivers under 20 are three times as high as older drivers.
What these statistics don’t tell you is how many injuries are caused by these accidents. This is why you should consider adding Personal Injury Protection, or PIP, to your policy. PIP covers medical expenses incurred in these accidents. It also includes a provision to pay for funeral expenses. PIP will pay for the expenses no matter who caused the accident.
Some states require all drivers to have PIP, so you might already have this on your policy. Some people choose not to pay for it in states that don’t legislate it because they already have health insurance. However, unless you have very good health insurance, PIP could still be a great benefit just for time when your teen driver is most at risk.
Get the Right Car
If you want to keep insurance costs low for your teen driver, the cheapest option is to have him be a secondary driver on the parents’ cars. If you do get the teen his own vehicle, take some time to research what the type of car will do to your insurance costs. Not all cars cost the same to insure.
If you have narrowed down the choices, you can call your insurance agent or the consumer line for the company and ask for a quote for adding a particular model of car to the policy. You don’t even need a VIN to do this, just the make, model, and year.
Obviously, the more expensive a car is, the more expensive insurance will be. This is why the majority of parents buy a used car for their teen driver. If you do buy a brand new car, be sure to look into GAP coverage. This policy covers the depreciation cost if the car is wrecked before the loan value equals the actual cash value of the car.
Sports cars, prized by many teens, are actually the most expensive to insure, even used. Insurance companies classify all two-door coupes as sports cars, even if it isn’t very sporty. So if your goal is to buy a car that is inexpensive to insure, stay away from two door cars.
Do look for safety equipment on any car, even a used one. Insurance companies give discounts even to teen drivers who have cars with anti-lock brakes, airbags, or other safety features.
Look for Discounts for Your Teen
Besides discounts on the car, your teen might be eligible for discounts that can help lower his premium. Primarily, if he is at least a B student, tell the insurance company and you’ll probably get a good student discount.
If your state doesn’t require a driver’s education class in order to be licensed, have him take one anyway. Insurance companies reward drivers who take driving courses, especially young drivers.
Even if your teen has already taken a driver’s education class, look into a teen driver’s safety course. Kind of like a defensive driving course, these courses provide extra training to help teens learn how to cope with the various situations that they come across while driving.
These courses can be found locally by the same businesses that provide defensive driving courses. Some insurance companies have established their own programs for teens to complete. The National Safety Council also offers a course online. Call your company and ask if you can get an additional discount if your teen completes one of these.
Even if you won’t get a discount for it, the National Safety Council suggests setting rules for driving that the teen must abide by, and establish consequences if they don’t. Driving is a risky business, but you can help them by guiding them in those first years they have their license.
Don’t Buy More than You Need
As financial experts advise, don’t buy more insurance than you need, even with a teen behind the wheel.
If your teen is driving an old clunker worth a couple of thousand dollars, you’re probably better off not paying for comp and collision on the car. Since the car value is so low, and your deductible will be subtracted from the amount you’d be paid to replace it, you’re better off dropping the extra coverage and putting that money away into savings for future repairs or replacement.
If your college student goes away to college without a car, and the school is further away than 100 miles, tell the insurance company. They will usually reduce the premium, since the student will only be driving during visits home.
Also, if you have a high school student who doesn’t drive to school, especially if he is a secondary driver on your cars, ask the company if they can take that into consideration when determining the quote. Most teen quotes take into consideration the daily commute to school, which increases the time they are behind the wheel. It is also riskier since they are driving with many other new, high-risk drivers.
Adding a teen driver to the family is a major family event. Take this opportunity to review your insurance to make sure you are covered with this new addition. It’s also a good chance to comparison shop. For more information on choosing an insurance company, and saving money while you’re at it, see this article by Insure U’s on the subject.
With this new time in the life of your family, you might not be getting the best deal from your present company. The only way to know is to get quotes from various companies.
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