Insuring a Car: Questions to Consider for a Teenage Driver
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Understanding the best ways for your auto insurance to merge with your teen driver makes it easier on your nerves and your wallet.

One day your child is five years old and arranging their toy car collection with obsessive precision. After the time warp that all parents experience, they are suddenly 15 and researching the learner’s permit process in your state.

Meanwhile, you may be researching cars for them to actually drive, knowing full well that you’ll also need to budget for insurance when they turn 16. Just adding him or her to your policy may be a significant cost. Add that to gas, maintenance and registration fees, and the monthly costs can quickly jump.

Understanding ways to get the best insurance policy for this situation—at a rate that works for your budget—can quickly become a priority.

Why Does Auto Insurance Cost More for Teen Drivers?

The reasons vary, but development and risk play big factors, says Ryan Pietzsch, an expert in driver safety education and training at the National Safety Council, in explaining why insurers typically raise rates for teen drivers. “Teen drivers lack experience, and they do not have the ability to cognitively tie cause and effect because the neural pathways in their brains are still developing.”

Those issues can come into play as teens make daily driving decisions, from changing lanes to deciding whether to text someone while at a stop light. Pietzsch explains that full development of the frontal lobe, where executive function occurs, happens last, sometimes as late as age 25. There’s also a gender gap, he says, with male drivers historically receiving higher insurance rates due to their tendencies to log more miles and to engage in riskier driving behaviors.

What Insurance Coverage Should You Have for Teens?

The answer depends on the rules in your state and how much risk you are comfortable with.

  • Liability auto insurance covers damages or injury to another driver. In some states, drivers are only required to have this type of policy.
  • Collision coverage is for the car your child will drive. It covers accidents with other vehicles or objects, such as a telephone pole or guard rail. It’s not always required by law, but many people prefer to have it included in their policy.
  • Uninsured driver coverage protects your child—and you—financially if someone who doesn’t carry insurance is at fault in a collision. The Texas Department of Insurance, for example, recommends looking into this as an option.
  • Comprehensive coverage protects you from all other car catastrophes. That might be a theft or a tree falling on it during a storm, or an animal that runs into your car. This option may not be worth the premium cost for an older car.

Ask your insurer about all the types of coverage it offers and decide which combination makes financial sense for your family.

What Discounts Do Insurers Offer Teens?

Discounts typically link to positive behaviors, such as making good grades, getting accepted to college or safe driving habits—sometimes using technology. Smartphone apps or built-in car software may monitor phone use, speed, hard braking, rapid acceleration and other habits on the road. They use technologies called telematics, which Pietzsch refers to as “risk management tools,” because they provide incentive for safer driving habits.

The whole goal is to create safer drivers and less risk on the road. The Insurance Information Institute says that many companies offer programs that include online safety courses, contracts between young drivers and parents, educational videos and practice driving logs.

Find out from your insurer what telematics and safety programs are available that can lead to reduced rates—and compare discount options among insurers.

Does the Type of Car Your Teen Drives Matter?

Absolutely—just as it does for adults. Sports cars will always cost more to insure, no matter who is behind the wheel.

Beyond insurance costs, safety should always be top of mind. Check the crash test ratings from both the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety before choosing a vehicle. “The National Safety Council recommends purchasing the safest vehicle that the teen’s family can afford,” says Pietzsch, adding that newer tech in cars includes automatic emergency braking and other advanced systems. “This technology is improving quickly and should be considered when purchasing a vehicle.”

That said, some research shows that safety-related tech may barely reduce insurance premiums—or not lower costs at all. That’s because the verdict is out on how effectively such technologies reduce accidents. Driver errors still happen, especially among teens. And new tech translates to more costly repairs after a collision. But when parents hear that car crashes are among the leading causes of death among teens, safety features may have more value than money saved on an insurance premium.

Where Will Your Teen Be Driving?

According to Texas Department of Insurance, the location of a teen’s car and how much they drive it can affect premium rates.

If your child goes out of state to college and leaves their car behind, for instance, you should let your insurer know. Only driving when they are home could potentially lower premium costs.

The Ultimate Goal

For families adding a teen driver to the household, the financial goal is to find the best rate for car insurance that ensures adequate coverage.

The parenting goal, however, is to teach kids to be safe on the road. “Build a relationship with your teen driver,” Pietzsch says. “Let them know that you are their coach and are there to help them succeed.”


Three Things to Do

  1. Calculate the total costs of buying and operating a car.
  2. Decide if a new or a used car would make sense for your teen driver.
  3. Consider these tips from the Texas Department of Insurance on adding a teen to your insurance policy.

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