According to recent studies, up to 40% of teens are waiting to obtain a driver’s license until they turn 18. Why? It can cost $200 or more per month for insurance, not to mention to soaring price of gas. What can you do to keep the costs down when your teen gets their driver’s license?
1. As with all insurance coverage, it really pays to shop around. You may think that you already have a great deal with your current insurance company, but after you add a teenage driver, your policy cost will likely double. The difference in cost when adding a teenager driver can vary dramatically from one company to the next.
2. If your teen has good grades (a B average or better), this may lower insurance costs by up to 20%. Be sure to ask about discounts for good students and encourage your teen to keep those good grades (or you have my permission to threaten to take away the driving privileges).
3. Consider purchasing an older car for your teen and obtaining insurance coverage for them to drive just that car. It will be far less expensive to insure your teen if they are driving an older car with just basic liability coverage. Consider the risk that the insurance company has if your teen is driving the $40,000 to $50,000 family vehicle. What you should be looking for is a used vehicle that has a value of $2,000 to $3,000 or less. You will not need collision or comprehensive coverage (the coverage that protects your vehicle from damage), but you will need liability (coverage for damage to other people and their property). Additionally, you should consider a higher deductible of $1,000 which will bring the cost down even more. Some people also suggest that on your designated teen vehicle that you place only the teen’s name on the title. This would protect you from being sued as the owner of the vehicle if your teen is in an accident.
4. It probably goes without saying, if your teen is cited for traffic violations or is the cause of an accident you will be paying much more. Teens need to be put on a strict zero tolerance policy and required to drive safely and within the speed limit. You should point out to them that insurance at affordable rates may not be an option if they cause even one traffic accident. A little tough love here is certainly warranted.
I do not think that every child turning 16 should be driving. It is also my opinion that if a teenager can not earn the money on their own to cover their driving costs, they should not be driving. As a financial planner for 20 years, I have heard countless horror stories about the financial havoc that a teenage driver can have on a family. There seemed to always be one constant in these stories, the teen was not paying for the insurance and as a result did not seem to take their driving responsibilities seriously.
Here are some interesting statistics on teen drivers:
Statistics on teen driving and crashes
to crash than an adult.