What to Know About Car Insurance for Teens

Picture this: Your teen is bursting with joy after having just passed their driver's permit test. They can't wait to get behind the wheel. But you? You're probably freaking out a little at the possibility, and overwhelmed with the idea that not only is your kid growing up, but you're going to have to shop for car insurance and pay the price for this newly-acquired permit. 

Car insurance is complicated, even for adults with perfect driving records and years of experience behind the wheel-and it can feel even more expensive and frustrating for a new teen driver. While you might be tempted to cut coverage (which likely isn't in your best interest), the building blocks of car insurance stay the same. 

So, let's break it down so you can go back to celebrating your teens' accomplishments. Here are some things to consider so that you can make an educated choice.

While it is possible to get a teenager their own car insurance policy, it's typically less expensive to add them to your existing policy. You could remove them in the future if they are involved in a collision, and your rates increase beyond what you can manage. You can also remove them when they move out on their own, or head to college out of state.

Many insurance companies do not require you to add your teen driver with a learners permit to your policy until they get their driver's licence. At that point it's required by law in most states that they are on the policy if they are regularly driving a car. However, give your agent, or the insurance company, a call when your teen gets their permit. Although it may not be required, some people choose to add their teen to the policy anyway, and your insurance company can discuss your options, benefits and drawbacks with you. 

When adding your teen to your policy, it's a good time to reevaluate your coverage, and consider whether additional coverage is prudent. Teens have a much higher likelihood of being involved in a crash-and therefore a higher likelihood of causing property damage, injuries, and death. Among teens ages 16 to 19, traffic accidents are the leading cause of death, with six teen deaths a day.

"Consider today's costs of vehicles on the road and medical expenses if you cause an accident," says Janet Ruiz, CPCU, AIM, director of strategic communications at the Insurance Information Institute. "The state liability limits are the minimum, but often don't cover the physical and medical damages in a bad crash. The driver is then responsible to pay the rest."

If you can't afford to replace your vehicle if your teen were to damage it beyond repair, consider getting collision coverage or increasing your collision coverage if you don't currently have enough. In addition, "Parents should consider the assets they are protecting, including their home, small business, etc.,'' says Ruiz. "Due to the high vehicle costs and medical costs, it is wise to increase liability limits when you have younger, inexperienced drivers in the household."

If you own multiple cars, and your teen is only going to drive one of them, you can have them listed as a driver of that car only. In addition, if they only drive occasionally, the cost of coverage may be less than if they own their own vehicle. 

"Many parents also purchase personal umbrella policies over their auto and home liability exposures for increased liability protection," says Ruiz. These policies are relatively inexpensive and give you financial peace of mind.

While cutting coverage is likely not the financially savvy choice in the long run, there are ways that you can save on your car insurance policy, even with a teen driver. Be sure to give your insurance company a call. If you haven't bundled your policies to cut costs, or increased your deductible (if you can afford it) this may be the time to do so. 

Insurance companies offer discounts for teen drivers that have excellent grades. Maintaining a specific GPA-the exact umber varies by insurance company-will insure that your rates are as low as they can be. In addition, some offer discounts for the competition of specific programs designed to teach your teen safer driving skills. 

If your teen leaves for college out of state, or a significant distance from your home without a vehicle, give your insurance company or agent a call. They may be able to reduce your rate based on their decreased amount of driving. 

Lastly, in the long run, teaching your teen safe driving and the fundamentals of defensive driving is the best way to save money in the long term.  A single speeding or traffic ticket, or small accident can raise your rates for years. "Mobile apps [or phone] settings that turn off texting while driving save lives and money," says Ruiz.