car insurance for

TEENS &
Young
Drivers

The minimum driving age varies from state to state. In South Dakota, teens are permitted to drive at 14 years and 6 months old; in New Jersey, you have to wait until you’re 17.

While it can be exciting to get your license, there are a few legal and administrative hurdles to overcome first. The most important of these is insurance. For teens and young drivers (and often their parents) insurance is a major financial commitment. This guide will walk you through the steps involved, and explain how you can reduce the potential insurance premiums.

Why are teen drivers
so expensive to insure?

Put simply, teen drivers are expensive to insure because they are far more likely to crash. Auto insurance rates are effectively a monetization of risk: the more risk insurance companies see you to be, the higher your insurance costs will be.

Road traffic accidents are the leading cause of death for Americans aged under 18, with more than 4,000 fatalities per year. A teenage driver is four times more likely to crash than any other age group. In 2015, 2,333 U.S. drivers aged between 16-19 were killed, and 235,845 were in a crash significant enough to end up in the emergency room.

Moreover, American car fatalities are more than twice as high as comparable developed nations, as the Data below shows:

  • united kingdom5.4
  • germany6
  • ireland8.5
  • united states13.9

*Road deaths per 100,000 citizens

  • Notably, all the European states in the dataset above all have higher minimum driving ages than the United States. Studies have shown that adolescent brains don’t reach maturity until well into their twenties, meaning that teens often don’t have the cognitive skills to make correct decisions while driving.

  • As a rule of thumb to work from, a driver needs 100 hours of experience behind the wheel before he or she is far less at risk of an accident. Because most teens don’t reach this threshold until after many years of driving, insurance companies charge much higher rates to insure them than other drivers.

When should you tell
your insurance company?

Generally speaking, your insurance company will contact you when your child reaches an age where they can begin driving. When you apply for insurance, you usually get asked for your children’s dates of birth. Because of this, they will be proactive in getting in touch when they think there’s another eligible driver in the household.

However, if you don’t hear from your insurance company, or you want to shop around to get some quotes, you should let insurance providers know as soon as you receive your learner’s permit. They’ll be able to walk you through the steps, and potentially talk you through the best options (although it’s always better to shop around for insurance quotes).

How do you get insurance for a teen?

When you decide to sign your teen up for insurance, follow the below steps to make sure everything is as smooth and simple as possible:

  • Call your insurance company
    (you can do this in writing or online,
    but it is far simpler to talk through
    options with someone on the phone).

  • Discuss with your insurance provider about the changes to the policy (or the new policy if you’re putting the teen on a separate policy). Be sure to get the following information:

    • Minimum Coverage
    • Deductible
    • Maximum Coverage
  • Ask your provider about all of the different permutations of insurance, and what discounts they offer. Most insurance companies have a multi-car discount, meaning that you can save by adding a driver with their own car and ‘bundling’ the teen car insurance together.

  • Provide the insurance company with the teen’s
    driving license information as well as the
    details of the new vehicle
    (if they have one).

Don’t sign up then and there on the phone. Make a note of all the key details and then take the time to decide. Your teen won’t be able to drive without insurance, but you should still make sure you’re shopping around for the best information.

Should I add my teen to my own policy?

By far the most common option is for parents to add a teenager to their own auto insurance policy. In most cases, this works out as a cheaper option (although you should still get quotes to determine if it is in your case). According to Progressive, there are two instances in which it may be preferable for the teen to have their own insurance policy:

  • If you have a luxury sports car that your teen will not drive. On a single plan, the insurance company will assume that all drivers will drive all cars. Your premium will reflect the fact that your teen may have access to your luxury sports car.

  • If your teen wants to be financially independent.

In all other instances, it will almost certainly be cheaper to add your teen to your policy.

To give an example: the average annual cost of car insurance for all drivers in the United States is $1,427 per annum. The average cost for a 16-year-old to have their own policy in 2017 was $6,573.

How expensive is it?

Actual insurance rates vary based on a variety of information. However, the biggest determinant is the actual age of the driver. Prices drop as a driver moves through their teen years (and their rate of crashing drops accordingly). The table below shows the declining per annum insurance rates for teenagers.

*Average Car Insurance Rate per annum

As a result, you should check back in with your insurance provider every six months to see if you can negotiate a reduced premium. The difference between premiums for a 20-year-old and a 16-year-old is, on average, $2,000, or 100% of the 20-year-old’s premium. This represents a major difference.

Is there a difference between male and female premiums?

Insurance companies profile drivers based on the behavior of other drivers. Statistics regularly show that male teens are more likely to have crashes than their female counterparts.
In California, for example:

  • the average insurance
    for a male teen in 2017
    was $3,999.

  • for a female it was
    $3,030 – nearly a
    difference of $1,000

Do the premiums vary from state to state?

State premiums vary greatly throughout the United States. The image (below) shows how there are major regional disparities in average premiums.

  • $1,000-3,000
  • $4,000-6,000
  • $7,000-9,000
  • $10,000-12,000

The most expensive state for a teen driver is Michigan, driven primarily by the No-Fault Driving Law in place there. Teen drivers in Michigan can expect to pay $12,654 per annum for insurance, or more than $1,000 per month.

By contrast, the least expensive state, by some distance is Hawaii, where teen drivers pay $1,253 per annum.

Although the actual price will vary depending on the specific circumstances of the driver, this gives an indication as to the insurance variations across the United States.

What are some tips for saving money?

Despite the fact that insuring a teen is likely to increase your monthly or annual premiums, there are a number of ways beyond simply having a clean driving record that you can save money. Your insurance company won’t always be forthcoming about these discounts (for obvious reasons), so make sure to enquire about them.

A Good Student Discount

Many insurance companies will offer discounts for those who have and maintain a good GPA. This is usually fixed at the 3.0 or B level. This is based on actuarial calculations showing that students who perform well in school are less likely to get into car accidents.

Studies show that students with an A or B average are 33% less likely to get into a crash. These discounts may also continue for up to a year after a student finishes school. For homeschooled students, you may be able to use your SAT or ACT scores to qualify for the discount.

Take Driver’s Education

If your state doesn’t require driver’s education, it’s still a solid idea to take the course, as it will show to insurance companies that you’re a responsible and informed driver and you will see a reduction in your premiums.

Take Additional Driving Courses

Like taking driver’s ed., taking an advanced driving course will reduce your premium (although you should confirm in advance of signing up that your insurance company recognizes it).

Teens who take a training course are 43% less likely to get a ticket, 14% less likely to get into a crash, and 19% less likely to be involved in a fatal accident.

Get a Practical Car

The car you drive affects your insurance premium in two key ways.

  • Firstly, it indicates the likelihood of having an accident. A faster car increases the chances of a car with more advanced driving features reduces the chances.

  • Secondly, the type of car affects how expensive a crash may be. If you’re driving a car that requires imported components, a small crash will be an expensive one for your insurance company (and ultimately for you).

According to research by The Zebra, the top ten cheapest cars to insure are:

    • Honda CR-V$ 1,232

    • Honda Odyssey$ 1,260

    • Jeep Cherokee$ 1,265

    • Ford Escape$ 1,269

    • Dodge Grand Caravan$ 1,278

    • Chevrolet Equinox$ 1,282

    • Jeep Wrangler$ 1,288

  • Kia Sedona$ 1,308

  • Toyota Sienna$ 1,321

  • Subaru Forester$ 1,321

In general, SUVs are cheaper for insurance purposes, because crashes are less common and less severe. Choosing an SUV for your teen will help keep those premiums manageable.

Get a Higher Deductible

A higher deductible will increase your out-of-pocket expenses in the event of a crash, although this will keep your premiums down. If your teen drives an older car (and one that you own outright), then it may not be worth repairing in the event of a crash. In this case, having a higher deductible, and skipping collision coverage and comprehensive coverage will be a better financial option.

Is your teen a college student?

If your teen is a college student at a college more than 100 miles away from home (and without access to a car) then you can get a typical insurance discount of 7% . This is because the insurance company sees the teen as less likely to drive and therefore less of a risk.

What can raise the cost
of insurance premiums?

The above steps are all geared towards lowering premiums. However, there are factors that can greatly influence premiums. Avoiding these is essential if car insurance is to be affordable.

DUI

On average, a DUI increases a teen’s annual insurance premiums by $2,398. By contrast, an adult’s premium will rise only $813 for a similar offense. This varies on a state-by-state basis.

The top ten states for teen DUI premium raises are listed in the data below (N.B. these numbers are the additional amount, on top of the annual premiums):

*Annual premium increase post-DUI

The average teen driver with a DUI can therefore expect to pay an annual premium of just under $19,000 in Michigan, or nearly $1,600 per month.

Speeding

Like a DUI, teens caught for speeding will also see an increase in their premiums. According to NerdWallet research, a teen driving 11-15 mph over the limit will get an increase of just under $700 on their premium.

Knowing the facts and figures behind auto insurance rates for young drivers will help parents and teens make smart, informed decisions. Getting insurance for a teen driver is a major financial outlay, but one that can be mitigated with a little knowledge.

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