INSURING A NEW TEEN DRIVER DOESN’T HAVE TO BREAK THE BANK

If you’ve been dreading the day your teen gets a driver’s license because of the fortune you’ll have to pay to cover him or her, our analysis shows that not every company sticks it to you

Published: July 30, 2015

Teenage drivers have the highest crash rate of any age group

For many parents, adding a teenage driver to the family insurance policy and handing over the car keys is a proud but scary moment. They know too well that teens have the highest crash rate of any age group, and they’re concerned about safety. The risk might strike fear in a parent’s heart, but so too might the expectation of what’s going to happen to their insurance bill. Our analysis found some good news. Adding a teen doesn’t have to be exorbitant, although it might mean that you’ll need to quit your current insurer and switch to a new one if you want a better price.

Some insurers charged our sample married couple as much as 250 percent more for adding a 16-year-old driver to the family policy; others charged a lot less. On average nationwide, the impact was a 90 percent premium increase. Hawaii had the lowest average increase and Alaska had the highest. That’s an additional $312 to $2,000-plus per year.

But when we drilled down by state and insurance company, individual savings opportunities emerged. In California, a 55-year-old couple without a child might choose Allstate Indemnity for its $1,762 annual premium, the lowest of the 16 companies we compared in the Golden State. But when they added a 16-year-old son to the policy, the premium jumped 194 percent, to a mammoth $5,182.

Consumers tend to renew their car insurance automatically, so if our couple erroneously assumed that such a price hike was standard, they might simply pay up. But shopping around would save them a bundle. Auto Club would charge the couple with the teen only $2,667 per year, 51 percent* more than they had been paying. 

(*Editor's note: This article was updated on August 18, 2015, to correct an error in the percentage increase that our example California married couple would experience if they were to switch from Allstate to Auto Club after adding a 16-year-old driver. Their premium would increase 51 percent, instead of the 4 percent originally reported.)

Teen safety measures work

There’s good reason why you should hunt for the best price: From 2004 to 2013, the number of drivers age 16 to 19 involved in fatal crashes plunged 55 percent, according to the Centers for Disease Control and Prevention. Safer cars may be one reason. Graduated driver licensing programs, which limit nighttime driving, restrict the number of teen passengers, and require supervised driving, may be another. They’ve reduced teen crashes by 10 to 30 percent on average, says the Insurance Institute for Highway Safety. But recent research also suggests that fewer kids are getting behind the wheel, because of the high cost of owning and operating a car. 

Average increased cost to a sample family when adding one teenage driver to the policy

Highest: Alaska

$2,000+

$312

Lowest: Hawaii

Where a Teen Driver Costs More – and Less

Average increase in premiums our sample family would have to pay for adding a 16-year-old teen driver to their policy in each state and county.

What You Can Do to Save Money and Keep Your Child Safe

  • When your teen reaches driving age, never blindly add him or her to your existing policy. Instead, ask your insurer what it will charge, then shop far and wide for a better deal.
  • Insurers prefer to reward non-driving behavior by offering discounts of up to 14 percent for students on the policy (under age 25) who have good grades.These won our sample family an average national savings of $263, and especially high discounts in Minnesota ($471), California ($474), and Louisiana ($688).
  • Make your teen share the family car or cars rather than let him have his own set of wheels. “Young people drive more responsibly when they share, because they don’t want to get in trouble for damaging mom’s and dad’s car,” advises Ruth Shults, a senior epidemiologist at the CDC’s National Center for Injury Prevention and Control. The family car will also typically be newer, with more safety features, and it’s easier for the parents to monitor its use.
  • Shults also recommends that parents supervise their child’s driving, even beyond the time requirement for that in today’s graduated driver licensing programs.
  • Forget about putting the kid on his or her own separate car insurance policy. We studied the prices for that, too, and insuring your child solo almost always costs more than the increase on the family policy.
  • Don’t bank on savings from the student driver training discount that insurers offer. We found that didn’t provide much bang for the buck—discounts of only $63 per year for our sample family, on average nationally. But go for this if you live in three states, where the savings were significant: Louisiana, $155, California, $334, and Massachusetts, $386.