A Parent's Guide to Insuring a Teen Driver

APTOPIX Holiday Travel

Adding a teenage driver to your car insurance policy will raise your rates. But you can control how much they'll climb.

Having teens drive a Camry rather than a Corvette, encouraging them to bring home report cards with straight A's, and urging them to keep their driving records clean can all have a major impact on rates.

"Putting your teen in a big, boring vehicle is going to be a lot easier on the wallet than giving them the zippy small car they may want," says Russ Rader, spokesperson for the Insurance Institute for Highway Safety (IIHS).

There is a reason teenagers cost more to insure.

New drivers are among the most dangerous on the road, racking up tickets and accidents at rates several times the rate of the average driver. (See “What a teenager does to your insurance rates.”)

A teenager does not have to drive. Bicycles and bus passes are cheaper, if you live in a place where that's feasible.

But if it's not, here is what every parent needs to know about the cheapest ways to insure a teenager.

Yes, You Have to Insure Your Teen Driver

Virtually every insurer will require that all licensed family members in a household be included on your policy, whether they drive your cars or not. You should let the insurer know when the child gets his learners permit, but typically the teen isn't listed (or your policy charged) until he or she is licensed.

If you are divorced and have only part-time custody of your child, you'll have to consult your insurance company. Each company has its own rules. The best case is that the parent with primary custody adds the new driver; the worst case is that both parents do.

The only way to avoid paying the premium for a teenage driver on your own car is a named exclusion. Through an endorsement to your policy, you and your insurer agree that the driver is not covered. Any claim caused by that driver isn't covered, either.

Your teen could insure his or her own car, but state laws governing teen ownership of cars differ widely. In general, a minor cannot own property or sign contracts, such as an insurance agreement, without a parent's consent and signature.

It is almost always cheaper to add teenagers to an existing policy than to exclude them, and then buy an additional car and insure that, says CarInsurance.com consumer analyst Penny Gusner.

Not-So-Hot Wheels

If your household has several cars, it can help to have your new driver assigned to a specific one -- the one that's cheapest to insure.

If your child will have a car of his or her own, one place to start when looking for a car is the IIHS's website, which lists insurance losses by make and model for vehicles built prior to 2010. Those vehicles with lower auto insurance losses will typically have lower auto insurance rates, while providing more protection if your teen is in a crash, Rader says.

The site also has a listing of the IIHS's top safety picks for 2011 and older model years.

June Walbert, a Certified Financial Planner for USAA, says a vehicle with a "bigger, faster engine costs more money to insure and more money to repair."

And just having a car with a powerful engine can be a temptation, Walbert says. "If you have that kind of power available, perhaps you'll use it." Instead, she recommends four-door sedans and crossover vehicles.

Don't Overlook Car Insurance Discounts

If your teen can't get by without wheels, check with your insurer to see what types of discounts might be available.

A study done for Nationwide in 2010 of almost 1,500 parents of teens between the ages of 15 and 19 found auto insurance costs soared an average of $800 a year just by adding a teenager to their policy.

Many auto insurers offer good-student discounts to teens who maintain at least a “B” average. At Nationwide, that discount reaches 25%, says spokesperson Elizabeth Stelzer.

Like many other companies, Nationwide also offers discounts if your teen completes a driver's education course, Stelzer says. And bundling multiple insurance policies, like auto, homeowners and life insurance, will also cut costs.

And as with adults, the cleaner the driving record, the lower the insurance costs.

If your teen is old enough to head off to college, lives more than 100 miles from home and doesn't have a car, you're also likely to get a break on your auto insurance, Walbert says. That's because the teen isn't a regular operator of the vehicle, but still can drive it when he or she comes home on break.

Asserting your parental influence

Several insurance companies offer monitoring devices that keep an eye on your teen's driving behavior. That may mean sending you a notification if your teen does something he or she is not supposed to do; providing the teen with verbal feedback; or transmitting video of the driving using a two-way camera.

Depending on the system installed, it might monitor certain specified behaviors, like speeding, seat belt usage, hard braking and cornering, arrival and departure times, or moving the car when it isn't supposed to be moved.

One deterrent to widespread usage of such devices may be their cost, as well as the monthly monitoring fee, Rader says.

With the Teensurance program offered by Safeco, auto insurance discounts of up to 15% are offered if the Safety Beacon GPS-based system is used.

"We want to create a tool that helps parents and teens having a discussion about what safe practices are," says Shawn Anderson, product innovation architect at Liberty Mutual Insurance, which owns Safeco.

Another option is technology that blocks cell phone calls and text messages when a vehicle is in motion and is aimed at preventing distracted driving, Rader says.

And Ford has introduced MyKey on some vehicles, which can be programmed to limit a vehicle's top speed or the volume of audio devices, he says.

"A lot of technology exists and will become more widely available in the future," Rader says.

The original article can be found at CarInsurance.com:A parent's guide to insuring a teen driver