Posted : 04/25/2012
Parents may experience sticker shock when they need to insure a young new driver -- adding a teen driver to your insurance policy can hike your rate by up to 44 percent. (See: "Adding a teen to my car insurance policy costs how much?") But if you're aware of discounts that your family qualifies for, you can still find the best auto insurance rate for your particular situation.
Some discounts you get as a parent, such as an employee discount, apply to the overall car insurance premium and therefore can lower the teen driver's premium, too, says Ron Moore, senior product manager for MetLife Auto and Home in Minneapolis.
Joel Camarano, executive director for auto underwriting at USAA in San Antonio, Texas, says most discounts apply to the entire coverage for an individual driver, but the rules vary by state regulations and by company.
"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.
Moore says most insurance companies allow you to "stack" discounts but establish a maximum total discount of 15 to 25 percent. (See: "Auto insurance price information.")
In addition to discounts, there are other steps you can take to make your young driver’s auto insurance affordable. Here are seven things to consider when comparing multiple auto insurance quotes for your teen.
"Most insurance companies provide a discount to high school or college students with a B average or better or a 3.0 or better," says Camarano. "Generally the discount is up to 10 percent, and it applies to the student's entire coverage."
Moore says most insurance companies will check a report card or transcript once per year.
"Good student discounts are usually available from the beginning of the policy right through college," says Moore.
Most 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.
"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.
"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.
A common way to lower your premiums is to raise your deductible from $250 to $500 or $1,000. However, Moore says parents should realize they may need to pay that deductible 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 are responsible for medical bills above the liability limit," Moore says.
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. (See: "What is personal injury protection (PIP) coverage?")
"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.
In states with no-fault insurance, PIP coverage pays for your medical bills no matter who is at fault for the accident, says Moore.
You can reduce your premiums by choosing a vehicle with high safety ratings, says Camarano. (See: "Less is more: Tiny cars have highest car insurance injury claim rate.")
"We developed a ranked list of cars with the best value based on their price and their insurance premiums, which are linked to their reliability and safety. 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."
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