Car insurance for a teenager can be a shockingly expensive addition to your monthly budget. It's important for parents to understand the factors that go into calculating the cost of car insurance for a teenager to help reduce the sudden added expense.
Preparing to Insure a Teen Driver
Teenagers are considered high risk to insurance underwriters because they are newly licensed, typically more likely to get into an accident, and practice less-than-safe driving habits. The biggest hit comes when the teenager is first added to the policy, and it can gradually drop each year, provided the young driver doesn't any tickets or have any accidents.
If you can, it's important to prepare your budget ahead of time for adding a teenaged driver to your car insurance policy. A typical family policy increases by 44% by adding a teenager to a one-car policy, while a two-car family will see an average cost hike of 58% and three-car families should budget for at least a 62% hike. However, in some cases, you might need be prepared for well over a 100% policy increase.
Another item to consider is whether you should get your teenager their own insurance policy or add them to your existing policy. There are pros and cons to consider. Getting a teenager their own policy can cost significantly more than adding them to your policy, because of multi-coverage discounts and the fact that teens are typically listed as a secondary driver on their parents' policy versus being the primary driver on their own policy. Even so, benefits like building credit and helping them to reduce their own insurance costs down the line may be worth it.
Varying Rates for Teenage Driver Coverage
Unfortunately, rates and examples can vary widely so it's very important to contact your own insurance company as soon as your teenager gets a learner's permit. CarInsuranceCompanies.com indicates that the average national cost to insure a teenager is around $2,150 per year, with a general range from $1,200 to $4,850 for an annual policy. The national average is $1,700 for all drivers, regardless of age. Clearly, adding a young driver has the potential to raise your policy cost significantly.
Lowest Priced Providers
Value Penguin looked at over 200 cities and 103 companies to identify the most affordable premiums for a 17-year-old male driver. They also provide a great breakdown of each state and which carrier is the most affordable in each location. Their other criteria were driving a 2011 Toyota Camry, no prior insurance, full coverage with 50/100/50 liability limits and $500 deductible, and the primary driver being a 45-year-old married parent with no prior accidents or incidents on their record.
The cheapest options for this scenario aren't necessarily nationwide carriers.
- Erie Insurance seemed to have some of the best rates in the Northeast and near Midwest.
- Grange Insurance Association was found to have some of the lowest prices in the western region of the country.
- On a national basis, rates with Nationwide and State Farm were often the lowest.
This study revealed about a $2,600 per year average increase to add a 17-year-old teenage boy to his parents' policy, versus over $5,000 more per year for the teenager to have his own policy.
As Insurance.com points out, the cost of covering a teen driver is influenced heavily by location, as well as other factors. When comparing rates in ten zip codes in multiple states, they discovered:
- On average, the household car insurance bill rose 152% when adding a teen driver
- Adding a teenage boy was more expensive, with an average rate hike of 176% compared with 129% for teenage girls
- California had the highest rate increase at more than 200%
Insurance.com provides a chart comparison of six different companies (GEICO, Farmers, State Farm, Progressive, Mercury, and AAA), featuring each insurer's California rate. Some companies had only slight deviations, while others had a difference of $1,000 per year or more. On average, a female will pay $3,030 per year while a male will pay just under $4,000.
Vehicle Type Variation
Nerd Wallet compiled rates in eight of the most populous states for a family with and without a teenager behind the wheel of two popular vehicles, a 2015 Toyota Camry and a 2015 Ford Escape. Based on their research, the states that had the lowest and highest policy rate increases when adding a teen driver are:
2015 Toyota Camry
- Most expensive: Florida ($1,859) and New York ($1,839)
- Least expensive: California ($1,208) and Illinois ($1,375)
2015 Ford Escape
- Most expensive: Florida ($2,267) and New York ($2,038)
- Least expensive: California ($1,328) and Illinois ($1,665)
Their research notes it's less expensive to add the teenager to your own policy versus getting them their own policy.
Factors Influencing Teen Care Insurance Rates
If you understand some of the factors that go into insuring a teenager and plan accordingly, you may be able to save yourself a few dollars each policy period. You can do this by choosing a different vehicle, different company, or deciding whether a separate policy is a better option. A number of factors impact the cost of adding a teenager to your auto policy. Examples include:
- Gender: It's well-documented that it costs more to insure boys than girls, so if you have a son, prepare for the possibility of a particularly steep car insurance increase.
- Type of vehicle: Insuring a teenager in a sports car will be significantly higher than a car that ranks as a lower risk. Check Insure.com to get the latest list of cheapest and most expensive vehicles to insure for 2017. The Insurance Institute for Highway Safety Highway Loss Data Institute maintains statistics on insurance losses by make and model of vehicles as well, which can be a great resource to see how the vehicle rates.
- Zip code: Unless you're prepared to move, this factor is out of your control if you live in a zip code deemed to be higher risk for insurance.
- According to Bankrate.com, Arkansas is the most expensive state to insure a teen driver, with an average increase of 116.34%.
- If you're lucky enough to live in Hawaii, you'll see the lowest increase as things like age or driving experience can't be factored insurance premiums there due to a state anti-discrimination law.
- Access to a vehicle: Do you have one car for the family to share, or could each person be driving their own vehicle at any given time? That can influence rates for adding a teenager as well.
- Driving Record: Insuring a teenaged driver with tickets or a prior accident can cause rates to jump, sometimes significantly.
How to Get Potential Discounts
There are some potential ways you can get a discount and hopefully offset the huge expense. These include:
- Ask if your company offers a good student discount and what the GPA parameters are. GEICO notes full-time students with a B average or with dean's list or similar honors could receive up to a 15% discount, depending on state. However, traffic offenses will nullify the student discount.
- If your child will be away for any part of high school or will be in college, ask about potential discounts.
- Consider having your teen take a defensive driving course if your carrier offers a discount for doing so. One example is State Farm's Steer Clear Safe Driver Discount Program.
- Play around with policy parameters like raising your deductible and/or inquire about low-mileage policies for those who don't drive far on a daily basis.
- Consider reducing or dropping expensive coverage options like comprehensive and collision if your teenager is driving an older vehicle that is not financed.
- Are you divorced and your child doesn't live with you full-time? That is a special scenario you'll need to address with each of the parents' carriers to see if it makes sense to insure the teenager on both policies, or one, or whether there is a discount for shared custody.
- Some companies offer GPS-based safety systems that may provide a discount. Safeco offers up to a 15% discount if the Teen Insurance Safety Beacon is used.
- Own an expensive vehicle? If your teen driver won't have access to it, ask about a possible discount for a named exclusion for that particular vehicle.
Ready to Insure?
It's really important to talk to your carrier in advance, as well as taking proactive steps to keep rates as low as possible. Insuring a teenager is undoubtedly expensive, but it doesn't have to break the bank if you do your research and they do their part to help keep rates at a manageable level those first few years when rates are their highest.