Parents may experience sticker shock when they need to insure a young new driver. Adding a teen driver to your insurance policy can raise your car insurance rates drastically -- don’t be surprised if your premiums double. But by comparing car insurance quotes and looking for discounts that your family qualifies for, you can obtain the best car insurance rate for your particular situation.
Discounts can help balance out the hike your auto insurance rates take when adding a novice driver to it.
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, 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.
In addition to discounts, there are other steps you can take to make your young driver’s auto insurance affordable. Here are ten things to consider when shopping for car insurance for your teen driver.
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.
Most car insurance companies offer a 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.
"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 you teen driver to take a driver safety class. The better your child drives, the better it will be for your car insurance rates.
"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.
A common way to lower car insurance premiums is to raise your deductible. Once 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."
Camarano says drivers must meet their state's minimum car insurance limits, but he says most people need more than that to be adequately protected in an accident.
"If you have a newer car, you'll likely need comprehensive and collision coverage," he says. "If you have an older car, you might not need them, but you need to be careful about stripping out too much coverage because you could need it to repair or replace the car."
Moore says parents should be wary of lowering liability coverage limits. "If your child is at fault and injures someone, you as a parent may be responsible for medical bills above the liability limit," Moore says. The same holds true if there is severe damage to property and your property damage liability limits are exceeded.
Moore says Personal Injury Protection (PIP) coverage is mandatory in some states. It typically covers, within the specified limits, the medical, hospital and funeral expenses of the insured, passengers in the vehicle and pedestrians struck by him.
"In states where it isn't mandatory, you can generally drop it if you have health insurance to cover your medical bills," says Moore.
Camarano says that one reason you may want to keep your PIP coverage is that it also provides protection for your passengers if they don't have health insurance.
Look at other add-on coverages to see if they are needed or not, such as rental car reimbursement. If they aren’t, drop the coverages and save.
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. Second, if the car has shown not to have as high of claims as other vehicles car insurance providers cut it a break in rates.
"Not only is it cheaper to insure a car with a better safety rating, but you're also helping to protect your teen driver from an accident," says Camarano.
One ticket or crash by a teen driver can send your already high car insurance rates into the stratosphere. For this reason, it’s essential for your young driver to have a spotless driving record.
Also, the faster 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.
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.
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.
The car insurance company you had before your teenager became licensed may no longer be the best fit for you now. Car insurance rating systems vary greatly, so to find the best car insurance rates for your household requires you to comparison shop with multiple auto insurance companies.
By comparing rates you may find your current auto insurance provider still gives you the best rates and service, or more likely you’ll find you can save hundreds – if not much more – by switching insurance companies. And don’t just shop around when your teen receives his or her license, it’s wise to continue to shop before each renewal period -- or at the very least once a year. Car insurance companies’ rates can change significantly within a year’s time and every little bit of savings counts when you have a teen driver on your policy.
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