How to save money on a teenager’s car insurance

For many teenagers, a driver’s license represents freedom and greater independence. For parents, a newly licensed teenage driver can cause not only significant anxiety, but also a shocking spike in car insurance costs.

I almost fell to the floor when I opened the first car insurance account after adding my 16-year-old daughter to my policy. It was literally twice the previous month. I was sure it was a mistake. Maybe I forgot to pay the previous month’s bill? I immediately called my agent, who couldn’t offer much comfort. That’s right, he said. Add a teenager to your policy and your premium will jump.

“Insurance is all about risk and rates are based on several factors, including who you are, where you are, what you drive and how you drive,” says Ali Byers, spokesperson for insurance comparison website The Zebra.

For most carriers, “who you are” includes age, which is an important factor in determining your auto insurance rate.

“Because teenagers pose a much higher risk than older drivers, with a greater chance of car accidents and road deaths, their car insurance rates will be much higher,” says Byers.

We all have to start somewhere, but given this lack of experience, drivers over the age of 25 (or their parents) can expect to pay 115 percent more per year than the average driver — $1,667 for a six-month policy, versus the average for the US from $774 — according to research conducted by insurance comparison site The Zebra.

The good news is that parents and teens have options to save on teen car insurance rates, says Byers, who suggests shopping around to get started.

“You may find that you could be paying a lot less for the exact same policy or even better,” says Byers.

Also, ask your agent to apply any applicable discounts. I was able to shave a few percent off my premium by signing up for an auto pay plan through my provider.

Here are more tips to help you save, courtesy of The Zebra.

Keep your teen on your auto insurance policy: Car insurance is even more expensive for teenage drivers on their own policy. Parents who choose to insure their teen under their policy typically save about $955 every six months compared to a stand-alone policy with the teen driver.

Good student discount: If your driver has good grades—typically a B average or better—ask about a good student discount. Nationwide, Progressive, Geico, All State and others offer various student discounts. Students insured by State Farm can save up to 15 percent by enrolling in the company’s Steer Clear program. Your insurer will likely require routine proof such as a transcript to qualify.

Safe Driver/Safe Driving Discount: These programs can not only help teenagers learn how to be safe drivers, but also reduce the potential for citations and accidents that can raise your premium. In New York, you can save 10 percent on your premium for three years if you take a state-approved course. The exact requirements and specifications for this discount vary, so check with your insurance company for details to get a lower rate.

Choose a safe vehicle at a moderate price: Insurance companies take the driver and the car into account when determining insurance rates. If you want to keep your premium low, consider a cheaper vehicle, such as a used car, with a good safety rating. New vehicles, trucks and luxury brands will cost more to insure.

Watch them drive: If your teen is a good driver, consider asking your carrier about usage-based insurance, such as telematics, a tracking device that monitors driving habits and trends, which helps determine the policyholder’s auto insurance premium.

Consider additional coverage options: If you’re not completely confident in your teen’s driving abilities, you may want to consider what’s called an accident waiver on your policy. Although it varies by insurer and your state, this would “forgive” the first accident on your insurance policy — meaning your rate won’t go up just because you were in a car accident. Note that not every insurance company offers this protection and there may also be some age and location restrictions. The Insurance Information Institute also suggests increasing your liability limits if you add a teen driver to your policy, as this can help protect against lawsuits or damages that may occur if your teen is involved in an accident.

Don’t pay for coverage you don’t need: If your new driver will be using an older vehicle, make sure you’re not paying for coverage you don’t need. Collision and comprehensive coverage is only for leased or financed cars or vehicles valued over $4,000. Compare the cost of paying for repairs out of pocket with the cost of comprehensive and collision insurance to see if dropping those coverages seems worthwhile.

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