5 Ways to Get a Lower Price on Car Insurance for Teen Drivers – The Wall Street Journal

Money > Insurance

Tanza Loudenback
Nothing spells freedom for teenagers like getting a driver’s license, and not having to ferry a teen to activities and events can be freeing for parents, too.
Young adults are the most expensive group of drivers to insure in the U.S., with typical policy costs

more than doubling when a teen is added, according to CarInsurance.com data, jumping to nearly $2,950 from $1,450 a year. Still, in most states, putting a new teen driver on the existing family plan is cheaper than buying a new, standalone policy. 
While a few of the elements that make car insurance for young drivers so pricey are unavoidable, including the lack of a driving record, there are other ways to cut costs:
Only about 1 in 7 drivers switched auto insurers last year, according to research firm J.D. Power. Being faced with adding an expensive new driver is a perfect time to test your options. 
Online quote comparison sites can help you find the least expensive policy for your teen’s driving profile and location. The Zebra, for example, runs your profile through over 100 insurance companies and sends you price estimates within a few minutes.  
Keep in mind that each of these factors can affect your premium:
Be careful not to over-insure your teen. A young driver usually doesn’t need to be on more than one auto policy, Ruiz says, like in the case of divorced parents. If a teen uses their own car at both households, only the primary parent should include them on their insurance.
Insurance companies offer numerous discounts, even for young adult drivers. In addition to State Farm, Progressive, Nationwide, Geico and USAA offer premium reductions—some as high as 25%—for students up to age 24 who earn good grades.
“The data shows that students who get B’s and above tend to be safer drivers,” Ruiz says.
Kevin Payne, a father of four in a suburb of Cleveland, added his two teens to his State Farm auto policy and discovered that discounts, including one for good grades, knocked nearly $30 off the premium each month, which Payne says saved the family about $250 for four vehicles. (Ohio also happens to be one of the states with the lowest car insurance rates.)
Enrolling your teen in a defensive driving or safety class may also lead to a premium discount. Some insurers even run their own virtual programs.
To score State Farm’s Steer Clear Discount, the company asks drivers to complete a safety course via a smartphone app, record their trips and solicit feedback from older friends or family members on their progress.
Sending a kid off to college without a car can reduce your premium, too. Progressive’s Distant Student Discount requires a student to be 22 or younger and enrolled in a college that’s more than 100 miles away from home. Because the student isn’t using a car year-round, their risk of accidents goes down.
And don’t forget about the standard discounts for drivers of any age: paying your premium in six- or 12-month increments, bundling multiple policies with the same insurer, setting up automatic payments or enrolling in paperless statements. 
You can find information about an insurance company’s discounts by clicking on their auto policy page (they’re usually well advertised) or by Googling “car insurance discounts” plus the name of the insurer.
Young-driver discounts aren’t available in every state. Scroll to the bottom of the discounts page on any auto insurer’s website and you’ll see a list of restrictions.
Most “at-fault” car accidents raise your insurance premiums. With a new driver on your insurance policy, one incident could leave the whole family paying more, even if you have a careful teen. 
“The more drivers you have in the household, the more opportunities you have for accidents,” Ruiz says. 
Consider adding accident forgiveness to your policy. Most companies will allow you to use the benefit once in a three-to-five year period as a kind of hall pass after an at-fault accident. The accident will still show up on your claims history report, which is available to all insurance companies, but your premiums won’t go up in the short term.
Some companies offer accident forgiveness at no cost to long-time customers or drivers with good records, but most will hike up your premium by up to 10% to cover the benefit if you opt in. Still, that’s a small price to pay considering the average car insurance premium increases by nearly 50% after an accident.
Be aware, however, that some insurance companies won’t sell this benefit to primary policyholders under 21 or drivers with multiple traffic violations, so a teen with their own policy may not be eligible. And it’s not available in every state.
Most states require minimum liability coverage for all drivers. This covers medical expenses and lost wages for the victim in an accident, as well as property damage to their car. But with the added risk of a teen driver, minimum coverage may fall short.
“It doesn’t matter if you’re driving the least expensive car in the household,” Ruiz says “if you hit somebody who’s in an expensive car and injure them, then you have an expensive claim.”
A separate personal liability umbrella policy can give you extra insurance if you run up against your auto policy limits. It saves you from paying out of pocket for damages or injuries (or risking your financial assets in the event you get sued).
So-called umbrella policies start at $1 million in coverage and cost between $150 and $300 a year. Plus, you can buy one policy from any provider that supplements both your auto and homeowners insurance coverages. 
“Typically, adding teen drivers is a good time to consider an umbrella policy to make up for some of that other stuff that the auto insurance may not cover,” Ruiz says, “or to just save you from higher [auto] premiums.”
Start by checking out what umbrella policy your current insurance provider offers before shopping around. Having all your policies in one place during a crisis can save time and headaches.
Whether you absorb the full cost of insuring your teen or ask them to contribute, it’s good to discuss the situation.
 “It’s always important for you to talk with the teenager and really set up what their responsibility is,” says Ruiz of the Insurance Information Institute. 
Help your teen understand how unsafe driving, accidents and tickets can impact your family’s insurance costs, Ruiz says.
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