Teenage Drivers: Tips for Battling High Insurance Premiums

August 12, 2014

I have a daughter who recently turned 15 years old and just got her driving permit.  I'm not sure who is more nervous -- her or me.

Teen driving can be an unsettling experience for all involved, especially when you start to consider the cost of having a teen driver. Even if you don't plan on providing your teen with a brand new set of wheels, insurance companies make sure to transfer the risk of insuring new drivers with higher premiums, something that can be a shock to your budget.

A recent insurancequotes.com study found that adding a teenage driver to a policy increased rates an average of 79%. The rates varied by state and gender (teenage males are more to insure, increasing rates an average of 92%), but either way, the sticker shock is undeniable.

If you're looking for ways to combat these costs, there are options. Start by talking to your insurance agent early in the process -- this can help you save 5-20%, depending on your circumstances.

Here are a few other ways to combat those costs.

Keep Those Grades Up

Drivers younger than 25 years old can earn a good student discount of up to 20%, although discounts can vary by state and insurance company. Some examples of good student behavior include:

  • B average or higher for all subjects combined
  • Inclusion on dean's list or honor roll
  • A ranking in the upper 20% on one of six standardized tests

Take a Safety Course

Many insurance companies offer driver safety courses.  Teens can also gain discounts by taking driver safety courses that are either insurance company sponsored or through private companies.  The courses put young drivers in real world situations, giving them the chance to learn and improve their driving skills in a safe environment.  In turn, these courses have been known to reduce collisions for teens.

Of course, these courses can cost you as well.  A basic in-classroom course can cost in the neighborhood of $200-$500.  Add the in-car driving instruction for another couple hundred dollars, or you can have them attend a defensive driving course that puts them behind the wheel in simulated situations (like a slick road) and you can add even more.  Put all of this together and most parents can spend $600-$1000 just on instruction.  Again, ask your insurance agent which courses qualify.

Consider Driving an Older Car

Premiums can be lower for older cars than new ones.  It goes to reason that a car worth less costs less to insure and used cars can cost less to fix or replace. Yet, newer cars have safety features like airbags, anti-lock brakes, and rear-view cameras -- all of which can lower premiums; the more safety features on the car, the lower your rates can go.  Talk to your agent to find out which cars are the best for your situation.

Start Considering Costs Early

Most insurance companies don’t start charging for the teen driver until they actually get the state license.  So while your teen has a permit and is preparing to drive, you can prepare for how to pay for it.

In addition, it can be important to let your teen know that tickets and accidents can lead to an even higher increase in insurance costs. If they know that reckless driving could lead to revoked driving privileges, they may be more likely to adopt safe driving habits.

This post was written by Andrew Tauer, a fixed income analyst for Colorado PERA. Would you like to write a guest post for The Dime Colorado? Send us an email at dimecontact@copera.org