Insurance Q&A: “How much is car insurance for a 16 year old?”

It’s arguably the greatest moment of their life and one of the most worrisome of yours.  Your teenager has passed driver’s education and will soon be licensed to drive.

Among the many new concerns you have, your car insurance rate should be near the top of the list.  Each insurer is different when it comes to newly licensed drivers.  Some companies request you list every person in your household who is 15 years of age or older, and exclude them if they are not going to drive.

Some things to consider:  How much will your insurance rates go up?  Should you simply add your newly licensed driver to your policy or start his or her own?  Are there any options available to reduce the costs associated with this addition to your policy?

How much will a teenage driver raise my car insurance rates?

The increase in insurance premium can range from a few hundred dollars to well over $1,000 per year.  There are several variables that affect the answer to this question.  The one guarantee: rates will go up, and in most cases, won’t come back down until your child is removed from the policy, excluded from the policy, or turns 25 years old, assuming he or she has a clean driving record.

One of many variables affecting the increase in your insurance premium is your child’s sex.  You can expect to pay quite a bit more for a newly licensed male driver.  Why?  The “insurance” answer is that male drivers tend to have many more tickets and accidents than female drivers. The “scientific” answer is probably testosterone.

Studies show male drivers behave as though the vehicle they are driving is an extension of themselves, therefore confidence levels can become elevated even though experience hasn’t been attained.  Try to remember the last time you had a young female driver revving their engine at a stoplight and peeling out when the light turned green.

However, it is worth noting that the popularity of cell phone use and text messaging while driving has narrowed the gap between female drivers and males when it comes to causing accidents.  A more detailed explanation of factors that affect insurance rates can be found @ how car insurance rates are determined?

A second variable is the type of car your teenager will own or have access to.  This probably doesn’t require much explanation.  You can expect the difference in insurance premium between a Chevy Cavalier and a Chevy Camaro to be several hundred dollars a year…in some cases per month…seriously.

Should I add my teenager to my auto insurance policy or start their own?

Again, there are many things to consider here before making you decision.  Some are not necessarily money driven.  Typically, your family will pay less overall if you add your new driver to your policy (assuming you don’t have the Camaro) versus starting their own.  Also, if children don’t have their own vehicle, you can take advantage of a multi-driver discount.

An insurance company offers lower rates for this, as multiple drivers using a single car means less exposure for the insurance company, and diminished risk of your teenage driver having an accident and filing a claim (because he or she is sharing drive time).  If you are adding another vehicle to your policy along with your new driver, you may qualify for multi-vehicle discounts as well.

Your teenager will usually pay more for their insurance if they start their own policy.  Building experience with the insurance company is one benefit of this decision.  Paying for his or her own insurance may encourage your young driver to behave better behind the wheel as well.  In addition, starting their own policy may also help with non-insurance related concerns such as learning how to budget and learning the value of a dollar.  I highly recommend calling your independent insurance agent or insurance company to discuss your policy in detail to see which option is best for your family.

How can I reduce the costs associated with insuring a newly licensed teenager?

There are multiple discounts @ how can I lower my car insurance rates available to ease the checkbook shock of adding a young driver to your insurance policy.  Some of the more commonly used are the good student discount and after some time has passed, the good driver discount.  If you have not already done so, this may be the time to raise your deductible as well.

Higher deductibles are one of the most overlooked options for lowering insurance rates, for children and adults alike.  Unless your family is in dire financial straits, never consider lowering you insurance liability limits as a means to lower your rate.  If your independent insurance agent or direct insurer offers you this option, it may be prudent to decline and look for a new agent or insurer. They probably don’t have your best interests in mind.