If your teen has started driving, you’ve probably made a few jokes about how everybody in your neighborhood should take cover. Ah, yes, making fun of teenage drivers and their abilities behind the wheel. It’s hilarious.
Until you get your new car insurance rates.
As you’ve probably heard, add a teenage driver to your policy and the average car insurance premium can go way up. As much as 80 percent, according to InsuranceQuotes.com.
“Drivers aged 16 or 17 are nine times more likely to cause an accident than a 45-year-old driver. That’s why car insurance companies charge them three to four times more than they would typically charge people from safer categories,” said Tony Arevalo, an insurance agent with Carsurance.net.
Still, there are some ways to hold down insurance costs when you have a teenage driver in the family.
You could not add your teen to your insurance policy.
We’re not saying you should do this, or even that it’s a good idea. We’re saying that you could go that route.
John R. O’Brien is an attorney in Chicago who specializes in personal injury, construction disputes and other types of litigation. He notes that parents don’t necessarily need to add teenagers or college students onto their auto insurance policy, provided those kids are driving the family car.
“For years, insurance companies and agents have convinced parents (including my own mother, many years ago) to list their children (teens and even drivers in their 20s) as drivers on the family car insurance policy and then, of course, pay a huge additional premium for doing so,” O’Brien said.
But he said consumers shouldn’t fall for that.
“In most, if not all, states, insurance follows the car,” O’Brien said. “This means that the policy on the car is primary, and anyone driving it with the owner’s permission is covered. And if you read the policy ― again, I’m talking about virtually all policies ― it says so.”
He likens it to when you lend a car to a friend. “If I borrow your car and have an accident, I’m covered by your policy, and vice versa,” O’Brien said.
So right about now, you’re probably thinking you should talk to your insurance agent. Maybe you should, but O’Brien suggests talking first to an attorney familiar with the insurance laws in your state.
“If you ask an insurance agent whether you have to put the kids on the policy, the frequent response is something like, ‘It’s better to do so,’ or whatever. Yes, it’s better ― for the agent, who gets a commission on that huge premium increase,” he said.
O’Brien has been practicing law in Illinois for about 40 years and has four kids, “all of whom have driven our family’s cars and none of whom were ever added to our policy.” He said that three of the four had car accidents, “of varying severity,” and all of the claims were paid.
“And the companies ― State Farm and Allstate, in my case ― never insisted that we add the kids, even after their accidents. After each claim, we only got hit with the normal surcharge for an at-fault accident, roughly 10 percent, for a couple of years, not the thousands in additional premium to put the kids on the policy.”
O’Brien said there are two exceptions when you should put your teenagers on the family’s auto insurance policy.
Exception 1: If your teen has their own car. If you buy a car for your kid, and your kid’s name is on the title of the car, and the kid is the primary driver, then you need to put the kid on your insurance policy, according to O’Brien.
“Which means, of course, that if the folks buy a car for their son or daughter to use, they should title it in the parent’s name or parents’ names,” O’Brien said. “And yes, it is possible for two parents to be listed as primary drivers on three or more vehicles.”
Exception 2: If you have a really cheap insurance policy. O’Brien said that some substandard carriers will issue policies, especially if the parents have a bad accident history, that specifically exclude anyone but the named driver or drivers.
“I’m not sure how they get away with this if the law says that insurance follows the car, but I have heard of it,” he said. “But all of the major standard carriers have the same provision regarding coverage for the policyholder or owner and anyone driving with their permission ― which includes, of course, their children. Laws in most states require it, for the obvious reason that the states don’t want their residents to get injured by uninsured drivers.”
For what it’s worth, Dan Weedin, a business risk consultant and insurance broker based in Washington state who mentors insurance professionals, agrees with O’Brien. Sort of.
“Let me start by defining who an insured is,” Weedin said. “According to any auto insurance contract, any member of the household ― children are defined as members as they are related ― is automatically covered on the insurance policy as a driver. [O’Brien] is correct: Insurance follows the vehicle and the concept of ‘borrowing the car’ is correct in theory.”
But Weedin thinks if you’re going that route, you’re taking a risk.
“If the insurance company asks at any point ― from inception of a new policy or at renewal ― to name all drivers in the household, then not listing a child would be a material misrepresentation and could void a claim,” Weedin said. “It’s not uncommon for insurers to update their records. In fact, many carriers want to know everyone in the household, including younger children, as they keep track of who will be becoming drivers.”
So maybe you don’t add your teen and just hope the insurer never asks you to list all the drivers in your household? Weedin isn’t so sure about that idea, either.
“If your young driver gets into an accident and isn’t listed on the policy, the company will still pay the claim,” he said. But the company may also “then require the young driver to be added, plus may look very carefully at whether they want to continue the account.”
It is important to note that each state has its own rules governing insurance. Don’t assume based on this article alone that you definitely don’t have to add your teenager to your policy. But O’Brien encourages parents to ask questions.
“The bottom line is that people should look at their policy and if they’re not sure, ask an attorney, not the insurance agent,” O’Brien said.
If you are going to add your teen to your policy, or you’re getting your kid a car with their name on the title, there are some other things to consider. Such as ...
Make sure your kid is the primary driver of an inexpensive car.
Yes, you want a safe car for your teens. No, you don’t want them driving a sports car that is super expensive to insure. (Unless money is no object, and if that’s the case, why are you reading this?)
Michael Schiferl, who lives in La Grange, Illinois, and works for global public relations firm Weber Shandwick, said that he and his wife bought an older third car in 2017 for their now-20-year-old daughter to drive.
“My wife and I both had newer cars, and drivers are ‘assigned’ cars as primary or secondary drivers by our insurance company,” Schiferl said.
But after he and his wife purchased a 2005 Volvo S40 from an aunt and made their daughter a primary driver of that car, their insurance bill plummeted by $800. So safe-but-older cars are probably the way to go.
Arevalo said that kind of premium drop is “entirely plausible, especially if they had collision and comprehensive coverages” on their cars. Those two forms of insurance, which cover damage to a vehicle, can amount to 50 to 60 percent of the premium, Arevalo explained, and “a 2005 car is significantly cheaper” to repair or replace.
That said, the Volvo may not have been the only reason Schiferl got such a good deal on his insurance ...
If your kid is going to college without a car, mention that to the insurance agent.
Schiferl noted that “most insurance companies have some provisions if your child is in college, far from home, given they are not driving. [That’s] something to ask about beyond grades.” He said he told his insurer that his daughter would be attending a university some 120 miles away from their home and cars.
This is a good point. Many insurers will give the parents a discount if the student is at a college 100 miles or more away and doesn’t have a car on campus. But since Schiferl brought up grades …
Inquire about a good student discount.
Many insurance companies will give a discount for kids with good grades. “The price reduction usually ranges from 10 to 20 percent,” Arevalo said.
There are certain limitations. According to Arevalo, it usually work likes this: “The insured subject has to be a full-time student with a GPA of 3.0 or higher to qualify. If the grades drop below that level, the insured will lose their discount.”
Schiferl said he submitted his daughter’s grades to his insurance company, which likely helped with the $800 drop.
Of course, you have to regularly remember to send your kid’s report card to your insurer, which can be a pain. But you could set yourself digital reminders.
You could also …
Tell your teen they can’t drive until they bring up their grades.
Asking a teenager to delay learning to drive until their mid-20s probably won’t go over well. But you own the cars and it’s your insurance policy. If your teen doesn’t have that B average, you could insist that they wait to get the license until their grades come up. Or if your teen is employed, you could make them pay the extra premium that their bad grades are costing you.
You might have also heard that rates are cheaper if your kid waits until they’re 17 or 18 to drive. But it’s really the grades and not the age that insurers are considering with high school and college students, according to Weedin.
“Rates on new young drivers are based on grades, not age. The only criteria that an insurance company can use on young drivers that indicates responsibility is their GPA. Waiting doesn’t have an impact,” Weedin said.
Enroll your kid in a driving course aimed at teenagers.
“State Farm, for example, advertises a Steer Clear program for drivers under 25, designed to improve their driving technique and earn a discount,” Arevalo said.
In fact, you may be able to get as much as a 15 percent discount, although State Farm’s website notes that it depends on the state. It’s also limited to teen and young adult drivers who have had no at-fault accidents or moving violations within the past three years.
Let the insurance company put a tracking device in your car.
You’ve probably seen the commercials about this option. You agree to have your car tracked, with either a plug-in device or an app you download on your phone, and your insurer will take note of how safely you’re driving. If you’re not braking too hard or speeding around like a madman, you get discounts. One warning: The ads tout how you can save money, but they never discuss what happens if you’re something of a lead foot (your rates could go up).
Still, these programs may help reduce your rates and teach your teenager better driving habits.
Some insurers are rewarding teen drivers for better driving habits with goodies beyond lower rates. Jon Bloom, vice president of personal auto at Erie Insurance, said that his company recently started such a program in Ohio and West Virginia and will soon expand it to Washington, D.C., and the 10 additional states it serves.
“The program uses an app to track driving behaviors including acceleration, braking, cornering, phone distraction, and speeding,” Bloom said. “Depending on how safely they drive, participants can earn up to $260 a year in the form of gift cards, distributed in $10 increments every two weeks. Rewards can also be donated to charity.”
According to Bloom, teen and young adult drivers have so far seen an average of 35 percent fewer phone distractions, 20 percent less hard braking and 20 percent fewer instances of at-risk speeding within the first 30 days of using the program.
And that may be the best reason to consider letting the insurers monitor your teen’s driving habits ― and yours, if you’re driving the same car. After all, it may be fun to make jokes about teens’ shaky driving habits. It isn’t such a hoot if your kid actually is a terrible driver.