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Kids & Money: Are You Prepared for a Teen Driver?

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Teen Driver.One of the scariest prospects that many parents face is that of having a teen driver. Many of us worry about what happens when our kids are old enough to drive. My son is still more than six years away from his driver’s license, but it’s something that I think about from time to time.

Teen drivers cost more to insure than most adults, so you have to take that aspect of the situation into account. On top of that, you also need to review your liability coverage, since your teen’s auto accident could result in having your own assets tapped if the damage is severe enough. Your auto insurance situation has the potential to become very different once the kids start learning to drive.

Are You Prepared for the Increased Costs of a Teen Driver?

One of the first things you need to realize is that a teen driver is going to cost you a little bit more than what you are paying right now. The biggest cost is likely to be in insurance premiums. According to CarInsurance.com, adding a teen driver to your policy can cause premiums to jump as much as 200%. That’s a huge difference in what you’re paying for coverage.

You also need to be prepared for other costs, such as wear and tear on a car that is getting more use, as well as added gas costs. One more person driving the car — and possibly driving in a way that doesn’t exactly increase the fuel efficiency of the car — can add to your regular costs.

As you get ready for a teen driver in the family, talk to your insurer about what to expect, and about what you can do to change your coverage, as needed. Some states only require $250,000 in liability coverage, and it is tempting to only get the minimum coverage. However, if you are concerned about the damage your teen driver might cause, you might want to increase that liability coverage, or even spring for umbrella coverage. If your child causes an accident and the liability limit is exceeded, and you don’t have the right coverage, your assets could be up for grabs.

Reducing the Cost of Coverage for Your Teen Driver

There are some things you can do to reduce the cost of insuring your teen driver. Some discounts, such as multi-car discounts, or discounts for having home and/or life insurance with the same company as your car insurance, are available with almost any policy. Additionally, you can also raise your deductible. As long as you have an emergency fund that can handle the higher out of pocket expense, this can be a way to reduce your insurance premiums, even if you do have a teen driver.

Check into other discounts that might be offered by your insurance company as well. Some companies (like mine) refunds 25% of your premiums each year when you go three years claim-free. This can be one way to recoup some of the higher premium costs — assuming your child doesn’t get any tickets or have an accident. Another option is to ask about a good student discount. Many companies offer discounts for teen drivers who maintain good grades.

You can also encourage more responsible driving by your teen by telling him or her that any increases in premiums will have to be covered from their own pockets. There is no way to completely alleviate the costs of a teen driver, but you can do your best to reduce the pain to your wallet.

(Photo: FrancoForeshock)

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6 Responses to “Kids & Money: Are You Prepared for a Teen Driver?”

  1. My oldest is a 4 year old. I’m nervous when she rides her bike with training wheels, let alone the thought of driving a car. :)

  2. Lei Lani says:

    In Virginia, the teen does not have to be added to the insurance until they have their actual driver’s license (not the learner’s permit). My advice to lower the costs is to spend a LOT of time with your teen driving you around (40 hours is required, with some of it at night or in inclement weather) while they have their permit. Most of my son’s friends waited to get their driver’s license until they were almost ready to graduate, for some reason. I added him to my insurance 3 months before my policy renewed, and had him get his OWN car, and his OWN insurance when my policy renewed. The added cost to me was $800 for the three months (even with the multi-car, good student, member of credit union discounts). His policy, since he was already insured, was $827 for the ENTIRE year.

  3. lostAnnfound says:

    Our oldest has had her license for 1.5 years now. To get there, she was required to pay half of the cost for test fees, classroom time & on road driving lessons & observation – $750.00 total, her cost approximately $375.00.

    Our insurance agent was a great help when she did get her license and we had to have her added to our policy. The agent told us about listing our daughter as an “occasional driver” since we were a one car family and we had three drivers in the household; it was assumed that she would not be driving a great deal of the time. Cost to add her on per year $660.00. We pay her insurance, she pays gas money. In exchange for paying her insurance, she runs errands as needed and will drop off/pick up her younger sister for us.

    She’ll be leaving for college in a few weeks. We’ll have to see if we can “suspend” her from the policy while she is away and then reactivate her when she’s home for break.

  4. Aaron says:

    Great article. We have a teen driver who’s been at it for about a year and a half now. He’s a good driver – but has already gotten into a little fender bender. Obviously rates went up which wasn’t much fun. Another thing is that many teens are having a tougher time finding jobs – so they aren’t able to pay for the extra gas they use. Plus, when they do get their own license, they don’t want to be seen with you (parent) anymore. :)

  5. Shirley says:

    Our 20 yr old grandson who lives with us was able to get a much less expensive auto policy by putting my name on it in addition to his. That gave him the multiple policy discount. But I’m wondering, if he should have an accident, how would that affect our policies. And would I also be liable for any deductibles or any other costs?


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