Insuring your teen
You can protect yourself financially and lower the cost of insuring your teen by doing the following according to the Insurance Information Institute (I.I.I.):
- Talk to your teen about the relationship between having an accident and insurance costs.
Teens often forget that the cost of driving includes auto insurance. Explain to them how a driving infraction or accident can drive up insurance costs.
- Shop around.
Insurance companies differ dramatically in how they price policies for young drivers, so spend some time researching prices.
- Insure your teen on your own policy.
It is generally less expensive for parents to add teenagers to your insurance policy than for teens to purchase their own. By insuring your teenager's car with your insurance company, you can also qualify for a multi-vehicle discount.
- Find out how your insurer assigns drivers to cars.
Some insurers will assign the driver who is the most expensive to insure (generally the teenager) to the car that is the most expensive to insure. If possible, assign your teen to the least valuable car. Some insurers will allow policyholders to do this if the number of automobiles equals or exceeds the number of insured drivers on a policy. With this kind of arrangement there can be no exceptions; your teen must use only the car to which he or she is assigned, even in an emergency. If your teen is involved in an accident with an unassigned car, penalties could be imposed and your premiums might increase.
- Increase your liability insurance.
Should your teen get into an accident, state minimums for liability insurance will not be enough to fully protect you from lawsuits. Many vehicles today are worth more than $15,000 and medical bills for injuries could easily exceed $20,000 for one person. If your teen is found negligent in an accident and the damages exceed your insurance limits, you will be held financially responsible and can be sued in court for those amounts not covered by your insurance.
- Consider an umbrella liability policy. An umbrella policy kicks in when you reach the limit on the underlying liability coverage in a homeowners, renters, condo or auto policy. It can also cover you for things such as libel and slander. For about $150 to $300 per year you can likely buy a $1 million personal umbrella liability policy. Most insurers will want you to have about $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy before selling you an umbrella liability policy for $1 million of additional coverage.
- Raise your deductible.
Going from a $250 to $500 or $1,000 deductible can save you 10 percent to 20 percent on your premium. You can use those savings to increase your liability insurance.
- Let your insurer know if your teenager is going away to school.
You may be eligible for lower premiums once your teen heads off to college, providing he or she leaves the car behind. Many insurers will reduce rates for students attending a school at least 100 miles away from home and who do not have a car on campus.
- Encourage your teen to get good grades and to take a driver training course.
Most companies will give discounts for getting at least a "B" average in school and for taking a recognized driver training course.
Contact your insurance agent when your teen is about to get his or her learners permit. Your agent will explain the costs involved in insuring a teen driver. The good news is, as your teenager gets older, insurance rates will drop—providing he or she has a good driving record.