Dear Insurance Adviser,
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I have two sons, 17 and 19, who are killing me on car insurance. They are paying some of the money and are working, so it's not the worst situation. However, I'm about to retire from the military, and one son is planning to go into the Army and the other to college in the fall. I have been told that if I drop them from my insurance, they will not only pay more when they try getting coverage on their own but also will have a hard time finding a company to cover them, as they will have had a lapse in insurance. Can you advise about how this really works and what is the best path forward for my wife and me, as well as our sons?
Whoa! Seventeen- and 19-year-old boys! I bet you are getting "killed" on your insurance rates! They're in the age group of drivers that has up to five times more accidents than the general population and, as a result, pays about three times more for insurance. And that's with a clear driving record. Rates escalate when teens start getting tickets or having at-fault accidents.
You mentioned "dropping them from your insurance." Unless they surrender their driver's licenses, that's not possible. If they use your home address as their permanent residence, the law requires that they be covered, in case they drive your cars or friends' cars. So, the insurance companies have no choice but to charge you a premium for each teen.
But there are some things you can do to significantly lower your costs.
Have your agent shop your insurance. Insurance companies are all over the board on how they treat young drivers. Pricing can vary by as much as 50%. Have the teens drive safe, older cars, which you could afford to replace out of your own pocket, so you wouldn't need collision or comprehensive coverage. That will save you about 40%. Whatever you do, don't skimp on liability coverage. You could lose your shirt in a lawsuit! If you're tempted to lower your critically important liability coverage, raise your collision and comprehensive deductibles as high as you can afford to go on the cars your sons drive. This will save you 25% over the cost of low deductibles. Insure the teens as part-time drivers rather than principal drivers. You will cut the extra premium for them by 50%. Have your 19-year-old son surrender his driver's license while he is in the Army. Then, your insurance company won't charge for him. If he comes home on leave, you could hire a chauffeured limo for him -- and still save a bundle! Your 17-year-old, soon-to-be college student could surrender his license also. But if he doesn't take a car with him to college and is at least 100 miles away from home, he could keep his license and be eligible for a distant-student discount, which will save you about 40% off the already-reduced part-time driver rate.
If you're concerned that surrendering their driver's licenses would mean higher rates for them later on, don't worry. It's a myth! It is true that it's harder to get car insurance if you own a vehicle and have had no prior insurance or have had a lapse of coverage, but that doesn't apply in your circumstance.
Hope this helps.
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