Teens pay higher auto insurance rates for a reason: they pose higher risks to insurers. Teens cause a high percentage of traffic accidents in their first few years on the road. While the average cost of car insurance for a 16-year old is nearly $4,000 per year, a 20-year old typically pays less than $2,000 per year. Here’s a closer look at teen auto insurance and how you can lower costs.
Car Insurance Coverage Requirements for Teen Drivers
If you are a teen learning to drive, you can get insurance coverage with a permit through your parents’ auto policy. Otherwise, you can get your own policy once you earn your driver’s license. Since each state has its own licensing and insurance requirements, check with your DMV.
Auto insurance, just like for adults, is required for teens in all states except New Hampshire. You need at least liability insurance that pays for damages you may cause in an accident. Liability can be broken down into two forms of coverage: bodily injury and property damage. It’s important to have the minimum liability coverage required by your state.
Teens may also be required to carry other forms of auto insurance, including comprehensive coverage, uninsured motorist coverage, and personal injury protection (PIP). While collision insurance covers damage to your vehicle involving another driver, comprehensive insurance covers broader causes of damage such as fire. Some auto loan lenders require both collision and comprehensive insurance coverage during the term of the loan.
Keys Discount Options Available on Auto Insurance for Teens
Auto insurance companies typically don’t promote discounts, which is why it never hurts to ask about them. Some insurers provide the following discounts to teen drivers:
- Good Student Discount – Getting good grades in high school or college pays off when it comes to auto insurance. If you have a “B” average or higher and you are under age 25, you can save up to 7% on insurance costs. That translates into savings of about $361 per year.
- Defensive Driving Course – If you take a state-approved defensive driving course beyond minimum state requirements, you can get up to a 15 percent discount from your insurer. It demonstrates your concern for lowering driving risks.
- Student Away from Home Discount – You can save from 5 to 14 percent on your insurance costs if you qualify for the discount that insurers offer to students who live away from their parents’ homes while attending high school or college.
- Raise Your Deductible Amount – One of the easiest ways to lower monthly insurance premiums is to raise your deductible. That’s the amount you pay with your own cash when you file a claim before your insurer covers the remaining balance. If you never need to file a claim, then you are winning financially in both the short-term and long-term.
- Avoid Fancy Sports Cars – The vehicle you drive has an impact on your insurance rates. If it’s a fancy sports car, you can end up paying higher rates. Sports cars can be targets for theft and violence. Driving a cheaper used model will help lower auto insurance rates for teens.
- Good Driving Record – Maintaining a spotless driving record shows you’re a good driver. It shows you care about risk management. Your insurer may reward you with a good driver discount.
Optional Car Insurance Plans for Teens
Some states allow insurance companies to provide parents with exclusions that confirm their policy does not automatically cover their teen. This type of named exclusion means the teen will not be covered if they get involved in an accident unless they have their own separate insurance.
Be aware of the types of auto insurance that are optional for all drivers. It’s possible to get extra coverage through add-ons such as rental reimbursement coverage, roadside assistance, and towing. Many drivers end up needing this coverage or wishing they had it at some point. Gap insurance is another option to consider. It pays the difference between what your insurance company owes you and the remaining balance on a car loan. This insurance is useful if your car gets totaled.
More and more young people are driving less and less and relying on alternative forms of transportation such as bicycles and scooters. Drivers of all ages can reduce auto insurance costs by reducing their annual car miles. Many people are already doing it to avoid high fuel costs and to opt for more eco-friendly modes of transport. So insurance companies have adopted the pay-per-mile model as an auto insurance option.
How to Adequately Insure a Teen Driver?
- Talk to your parents about joining their plan as you start your driving course.
- Consider getting your own insurance, then compare prices online.
- Ask the insurance agency about teen discounts.
- Choose a policy that makes sense for you and your parents.
How Can You Save Money on Car Insurance for Teens?
As mentioned earlier, there are plenty of different opportunities for teens to get auto insurance discounts, but you have to hunt for them since they aren’t well-publicized. If you’re a college student who lives over 100 miles from home, you may qualify for a “resident student” discount. Another way to save money on auto insurance is to bundle various policies together and purchase them from the same insurance provider.
Why Do You Need Teen Car Insurance Coverage?
As a teen, you need car insurance because the law requires it in most states, and it provides a financial safety net in case you’re involved in a crash. Contact our auto insurance experts at Advanced Insurance Group for more information on getting the right auto insurance for your needs.