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Car insurance for teens

Adding a teen driver to your policy can raise your car insurance rates drastically.

Rates differ wildly from company to company, so your priority should be comparing car insurance quotes. But here are 10 other things to consider when shopping for car insurance for your teen driver.

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Delay getting a license if you can

Typically a teen isn't listed as a driver (or used to calculate your rates) until he or she is licensed, though you should notify your insurance company once he or she has a permit.

Waiting to license a teenager beyond the minimum legal driving age doesn't just postpone the inevitable. A 17-year-old is considered less risky than a 16-year-old, even if both are brand-new drivers. Premiums will be cheaper.

The only way to avoid paying the premium for a licensed teenage driver is a named exclusion. Through an endorsement to your policy, you and your insurance company mutually agree that the driver is not covered -- and neither is any accident that driver causes. Not all companies allow this, and not all states do.

Join a parent's policy rather than buy your own

A teen can buy an insurance policy, but state laws vary. In general, a minor can't own property or sign contracts -- such as insurance -- without a parent's signature.

Even with parental consent, it is rarely cheaper to buy an additional car and insure that, excluding the teen from the parent's policy.

"The parent's policy will drop a bunch, but the teen's policy will make up for that," says Insurance. Managing Editor Des Toups. "Teens don't have a credit history, and they're not homeowners, and they don't have driving records long enough to get a good driver discount."

(See "Tips for first-time car insurance buyers.")


Stack as many discounts as you can

Joel Camarano, executive director for auto underwriting at USAA in San Antonio, Texas, says discounts may apply to the entire coverage for an individual driver or just certain portions of the policy. The rules for discounts vary by state regulations and company.

Ron Moore, senior product manager for MetLife Auto and Home in Minneapolis, says that some discounts you get as a parent, such as an employee or affiliate discount, are especially helpful because they can apply to your total car insurance premium and therefore can lower the teen driver's premium, too.

Another bit of good news is that insurance discounts can be stacked. "If a driver qualifies for several discounts, the first discount applies to your original premium and then your second discount to your revised premium and so on," says Camarano.

However, Moore notes that most insurance companies establish a maximum discount total of 15 to 25 percent.  Even if you’re eligible for more discounts they won’t be taken into account once you hit your insurer’s discount cap.

Lastly, insurance companies urge parents to make rules and enforce them.

"Some insurance companies will give a small discount of less than 5 percent if a student agrees to sign an agreement with their parents to follow certain rules such as not driving at night or not driving with friends in the car," says Moore.

Both parent and child sign the agreement so the insurer can look to the parent to hold the teen driver accountable.

(See "Cheaper auto insurance: a guide.")


Get the big one: a good student discount

Most car insurance companies provide a discount for students who hold at least a “B” average (3.0 grade point average) at school.   Data collected by Quadrant Information Services shows that nationwide the average good student discount is around 12 percent.  “The discount generally applies to the student's entire coverage,” says Camarano.

Some insurance companies will require documentation (a student’s report card or transcript) every semester, while other insurers will only ask for it once per year to make sure the young driver is still eligible for the discount.

If your child is making good grades, a good student discount can be available from the time your teenager is first licensed all the way through college.  Age limits do exist; typically, the student must be under the age of 25.


Away at school? That's a discount, too

Most car insurance companies offer a "student away" discount for students who are away at college or living away from home during high school.

"The rules vary by company, but usually the student must be living 100 or 150 miles away from home without a car," says Camarano. 

Moore says the discount is typically 5 to 10 percent of the student's premium, but some insurers advertise discounts of up to 30 percent. 


More school: a defensive driving course

"Every state requires some form of driver's education, so most insurance companies don't give a discount for the required class," says Moore. "Some companies, including MetLife, give a 5 percent discount for an additional driving class such as the classes offered by the National Safety Council.”

At USAA and other companies, Camarano says discounts in some states can be as high as 10 to 15 percent for taking a state-approved driver-improvement class.

Even if a discount isn’t offered for your child attending additional driving classes, it may be beneficial for your teen driver to take a driver safety class.  The better your child drives, the better it will be for your car insurance rates.

Lastly, defensive driving classes can be used to erase points after a traffic violation in some states.

(See "Defensive driving classes a way to save.")


Change your car insurance coverage

A common way to lower car insurance premiums is to raise your deductible.  One can easily raise it from $250 to $500 or $1,000. However, Moore says parents should remember they will need to pay that deductible amount if their teen driver damages the car.

"A less-experienced driver is more likely to have more small, fender-bender-type accidents or bigger accidents than an experienced driver," says Moore. "If you intend to repair every ding, you could end up spending a lot more money than you'll save on premiums with a higher deductible."

(See "How much can I save by raising deductibles?")


Choose a safe vehicle

You can reduce your premiums by choosing a vehicle with high safety ratings. First, there should be discounts for the safety features, including ones for airbags and antilock brakes that are standard in most new vehicles.

Look for vehicles new enough to have an electronic stability control system; the technology became mandatory in 2012 but was increasingly common even on cheaper cars before that. When the steering wheel is pointed one way but the car is going another, stability control steps in to keep the car from spinning.

"It's incredibly effective at preventing rollovers," says Des Toups, Insurance.com managing editor. "I wouldn't buy any SUV without it."

The vehicles with the best claims records -- small crossovers, SUVs and minivans -- tend to have the lowest insurance rates.


Keep a clean record

One ticket or crash by a teen driver can send your car insurance rates into the stratosphere, because they're higher to begin with.  A single speeding ticket can raise rates as much as 20 percent.

For this reason, it’s essential for your young driver to have a spotless driving record.

Your child will be eligible for a good driver discount if he or she keeps a clean record. A good driver discount can be up to 30 percent, though it takes usually at least three years of being licensed before the discount is offered to a driver.


Try a pay-as-you-drive (PAYD) plan

There are now several car insurance companies that offer generous discounts if you allow a telematics device to be put in your vehicle so that driving behavior can be monitored. They're known by several names, including usage-based insurance and pay-as-you-drive plans.

Braking, speed, mileage and times at which you drive are all tracked.  Knowing that someone is watching may keep your young driver in check, and if his or her driving skills prove the teen to be a low-risk driver, a discount will be offered. The discount is up to 45 percent with some insurers.

High miles, late-night driving and hard braking are the behaviors that sabotage a discount most.

(See "Pay-as-you-drive plans: A guide.")

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