What’s the Best Way to Insure a New Teen Driver?

Male examiner pleased with young male passing driving test, support and help

Getting a driver's license is a teenage rite of passage, and it's one that can be bittersweet for parents. Sweet because you no longer have to shuttle your child to sports practice or music lessons; bitter when you get the first car insurance bill after adding your child to your policy. Due to their immaturity and inexperience behind the wheel, teens are more likely to engage in risky driving behavior and twice as likely as adults to be involved in fatal crashes, according to the National Highway Traffic Safety Administration (NHTSA). As a result, putting your teen on your car insurance can cause your premiums to spike. To insure a new teen driver and keep your costs down, understand when and how to add your teen to your policy, investigate discounts, and compare prices from a variety of insurance companies.

When Does My Teen Need Car Insurance?

You can minimize sticker shock by doing your homework before your teen gets a driver's license. First, find out exactly when you will need to add your teen to your auto insurance policy. Laws on this vary from state to state. Some states require teens to be insured when they receive their learner's permit; elsewhere, you can wait until your teen has a driver's license to add them to your policy. Also, some companies will let you add a teenager with a learner's permit to your auto insurance policy for free; others won't.

Start by contacting your current auto insurance company to see when your child will need to be added to your policy and get an estimate of the cost. This gives you a starting point to work with and to see if you can find a lower price.

Should I Buy Separate Car Insurance for My Teenager?

In general, it's cheaper to add your teenager to your existing car insurance policy than to purchase a separate policy for him or her. Being a homeowner, experienced driver and long-time customer of the insurance company, or bundling your home and auto insurance with the same provider, are all factors that can lower your rates compared to what a novice driver would expect to pay.

Potentially high car insurance costs don't end when you add your teen to your policy. If your teenage driver receives several moving violations or has been involved in multiple accidents, your costs are likely to rise; the insurance company could even drop you from coverage. In this situation, it may make sense to buy a separate policy for your teenage driver. Some car insurance companies specialize in insuring drivers who have a lot of traffic tickets and accidents. Purchasing such a policy can minimize the cost of your child's insurance while allowing you to keep your existing car insurance coverage and low rates.

How Do I Add My Teen to My Auto Insurance?

When seeking the lowest price on car insurance for a teen driver, start with your current insurance provider. Your insurance agent can suggest ways to reduce your costs while providing the coverage your new driver needs.

Once you know what type of coverage your current company recommends, shop around to see if you can get a lower rate. Be sure to compare the same type and amount of coverage and deductibles from one provider to another.

You can go online to research car insurance and get a quote, either from specific insurance company websites or from a site that compares coverage from several companies at once. An independent agent is another option. Independent agents sell insurance from a variety of insurance carriers, so they can help you compare multiple policies and offer expert advice on ways to save.

Before making a decision, gather quotes from a minimum of three insurance companies. If you find a company that offers a lower rate than your present insurer, don't make a move until you weigh the cost of switching insurance companies against the savings. For example, if you're currently bundling your home and auto insurance, you will lose your bundling discount unless you also move your homeowners insurance to the new provider. If your existing insurance company offers accident forgiveness, which usually requires going three to five years without an accident to take effect, you'll have to start all over with a new provider.

How to Save on Car Insurance for a Teen Driver

No way around it, insuring a teen driver is expensive. However, there are several ways you can reduce the cost.

Delay Getting a Driver's License

If money is tight, consider whether your teen really needs to drive or whether they can wait. As teens get older, their premiums typically go down, so putting off licensing even a couple years can save you quite a bit of money. Given the cost of insuring a teen driver, having your teen use public transportation or even take rideshares to get where they need to go may actually be more cost-effective.

Get Smart

Car insurance companies often offer discounts for high school or college students who maintain a certain grade point average (generally a B or better). Many companies also offer "away-from-home" discounts for college students who live far from home, don't take a car to college, and drive the family car only when they're home on break. Insurance companies may reduce rates if your teen takes a driver education or driver safety course approved or offered by the company.

Buy Usage-Based Insurance

If your teen won't be driving a lot, purchasing usage-based car insurance can help keep costs down. One type of usage-based car insurance, called pay-per-mile insurance, offers discounts if a car is driven fewer than 10,000 or 12,000 miles annually.

Another type of usage-based auto insurance uses a device installed in your car or an app on your smartphone to track how you drive. These programs watch for risky driving behavior, such as speeding or braking too hard, and record how much and what time of day you drive.

For parents nervous about their new driver's safety, usage-based insurance programs such as Allstate's Drivewise, Esurance's DriveSense and Liberty Mutual's RightTrack offer peace of mind as well as cost savings. Just be aware that if the app or device discovers that someone in your family isn't a safe driver, or that you drive more miles than expected, your rates could rise.

Choose the Right Car

Planning to gift your teen a new set of wheels to go with that shiny new license? You may want to think again. Teens are more likely to speed when driving their own vehicles than when driving the family car, the NHTSA reports. If you're set on buying a new or used car for your teen, check with insurance companies first to see how much different vehicles cost to insure. Premiums can vary widely depending on how expensive the car is to repair, whether it's a frequent target of thieves, and whether it has anti-theft or safety features built in. According to the Insurance Information Institute, cars that are larger, easy to drive and rated highly in crash tests are best for teen drivers.

Insurance companies typically assign a primary driver to each car, calculating premiums in part on that driver's record. If your teen has a dedicated car (whether they or you are on the title), they will be listed as the primary driver on that car. Ideally, you want your teen assigned as a secondary driver on all of your cars, or as primary driver to the least valuable car in the family. However, some insurance companies automatically assign a teenage driver to the family car that costs the most to insure; ask the insurer about their rules.

Make Changes to Your Insurance Policy

Cutting out extras such as coverage for rental cars, replacement rentals when your car is in the shop, or other nonessential insurance can help offset the cost of your teen's insurance. If your teen will be driving an older car, consider dropping collision and comprehensive insurance, which cover damage to your vehicle. When an older car is totaled due to an accident, the collision or comprehensive insurance payout may be less than the cost of the coverage. Check car-shopping sites such as Kelley Blue Book and Edmunds to determine your car's value and calculate whether your money might be better spent saving up for a new car.

While you can cut some types of coverage, you may need to bump up other types of car insurance coverage when you have a teen driver. For example, if your insurance doesn't currently include roadside assistance, adding it can keep your teen safe in case of breakdowns.

Because teens are more likely than older drivers to be involved in serious accidents, you should also boost your coverage beyond the minimum state requirements. Consumer Reports recommends 100/300/100 coverage ($100,000 in coverage per person for bodily injury; $300,000 in bodily injury per accident; and $100,000 in coverage for property damage) or 250/500/100 coverage if you have a high net worth. You may also want to add umbrella auto insurance, which provides coverage above and beyond the limits of your auto policy, to protect your assets in case of a major accident or lawsuit.

Increasing your auto insurance deductible, which is the amount you have to pay when you have a claim, can also help reduce your premiums. Just make sure you can manage the new, higher deductible should you have a claim.

If you can afford to pay your annual auto insurance premium in one lump sum, you'll typically save money compared with paying monthly premiums. Some insurance companies also offer discounts if you set up automatic payments.

Finally, in many states, insurance companies consider your credit-based insurance score when determining your car insurance premiums. That's because higher credit scores have been found to predict lower insurance risk. Although your credit-based insurance score is not the same as your FICO® Score , the two scores are usually closely correlated. You can check your credit score for free; if it's fair or poor, taking some time to improve it before you add your teen to your car insurance policy may help you qualify for a lower rate.

Shop for Car Insurance Online

Some insurance companies give you a discount for getting a quote online or starting or completing the purchase process online. Insurance companies save time and money when they don't have to pay an agent to help you, and many pass the savings on to you.

Keep the Cost of Teen Driver Insurance Down

Insuring a teenage driver, especially a boy, doesn't come cheap. However, if your teen maintains a clean driving record with no accidents or moving violations, each additional year of driving experience should mean lower premiums. Encourage safe driving by setting and enforcing ground rules and modeling good driving habits yourself. Comparison shop for car insurance once a year to make sure you're getting the best possible deal.

Shopping for car insurance for your new driver can be almost as stressful as teaching your teen to drive. But by taking some time to research your options, you can find car insurance that will protect both your teen and your bank account.