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 (and expensive) of yours. Your teenager has turned 16, passed driver’s education and will soon be licensed to drive…hopefully not while texting.
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, especially 16-year olds.
Note: Many insurers demand that you list every person in your household who is 15 years of age or older on your insurance policy application, and exclude them if they are not going to drive.
Even though your teen may not be licensed or “allowed” to drive, she/he is certainly capable of getting behind the wheel of your car and causing an accident.
It is only fair that if you would expect your insurer to pay for this damage that they are at least aware of the potential drivers.
How much will a teenage driver raise my car insurance rates?
- The increase in premium can vary tremendously
- From a few hundred bucks to over $1,000 annually
- But chances are you will see a sizeable increase when adding a teen driver
- And it wont go down until they turn 25 and/or are removed from your policy
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 is that your premium will go up, and in most cases, won’t come back down until your child is removed from the policy, or turns 25 years old, assuming he or she has a clean driving record.
You can expect to virtually go bankrupt or have to exclude your child from your policy if they get a ticket and have an accident within the first couple of years with a license.
Insurers are already leery of your teen driver, but give them a reason to “worry,” and you’ll be in real trouble.
It is always a good idea to shop your insurance when you’re ready to add your teen to your car insurance policy. Here are a few more instances when you should be shopping your rate.
Why the automatic increase in premium?
- Insurance is a pretty simple (yet complex) numbers game
- More risk means the insurer needs to charge more for coverage
- Teen drivers are inherently more risky than seasoned drivers
- And thus the bump in premium when adding a teen to your policy
Insurance companies make money by charging more for insurance than they pay out in insurance claims.
Their goal is to match the lowest premiums to those of us who are least likely to be involved in an accident and the highest premiums to those of us who are most likely to do so…see where we’re going with this?
You guessed it. Teenagers represent a HUGE risk to insurance companies in the form of claims.
For the most part, this is simply due to a lack of experience behind the wheel.
Try to remember back to when you weren’t able to tune the radio while eating an Egg McMuffin and entering the freeway all at the same time?
Male vs. Female Teens: Who costs more?
One of many variables affecting the increase in your insurance premium is your child’s gender. 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.
It goes back to who is likely going to cost the insurance company more money.
Young men tend to drive quite a bit more aggressively than young women. They take more chances and have a habit of pushing the limits when it comes to operating a motor vehicle.
We at TTAI believe the “scientific” answer is probably testosterone!
However, insurance statistics are starting to reveal a growing trend of newly licensed females driving while distracted.
This alarming trend is related solely to the use of texting while driving.
Additionally, some studies show that driving while texting is equally, and in some cases, more dangerous than driving while intoxicated…you’re either looking at the road or you’re not!
You can expect the premium gap between young men and women to close if this trend continues and more and more claims are being paid as a result of female drivers.
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.
How can I reduce the costs associated with insuring a newly licensed teenager?
OK, it’s not going to be pretty, but you may be asking what you can do to lessen the blow?
Fortunately, just like everything else in life, you can do some things to “earn” the trust of your insurer and demonstrate that your teen driver is not as much of a risk as the average newly licensed driver.
Here are some basic points to cover when the time comes to add your teen.
Discounts, Discounts, Discounts
There are several discounts available to lower your car insurance rates to ease the checkbook shock of adding a young driver to your insurance policy.
Have your teen sit through one of those grueling Defensive Driver courses to earn a discount as well.
These classes are frequently offered online nowadays. Expect to pay about $50 for the class and to spend at least 4 hours learning and testing on how to be a safe driver.
Raise Your Deductibles
If you have not already done so, this may be the time to raise your auto insurance deductible as well.
Higher deductibles are one of the most overlooked options for lowering insurance rates, for 16-year old drivers and adults alike.
You may have enjoyed the $250 deductible for years, but raising up to the $1,000 deductible gives your insurance company the peace of mind that you are willing to put some skin in the game when it comes to paying for damage caused to your vehicle by your newly licensed driver.
Raising your deductible could knock a few hundred dollars per year off of your premium. That’s going to help quite a bit!
Note: 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. You need to switch to a different insurance company if the only way your current insurer can help is to risk your financial future!
Pick The “Right” Car
Assuming your new driver will have their own car, choosing the right car for your teen driver can mean a difference of several hundred dollars per year.
The cars that are the most expensive to insure are even more expensive when a teenager is driving them.
Should my 16-year old have his own car insurance policy?
Insurance agents get asked this question every day. While this ultimately comes down to your personal preference and risk tolerance, it’s generally not the best idea and here’s why:
You are responsible for your child – and their actions. Period. Many insurance claims are settled in court cases every year.
Having your teen on their own policy does not guarantee you will not be found negligent for their behavior…and sued accordingly.
Just don’t expect your insurance company to defend you in court if your child is not on the policy with you.
Your teen’s policy may pay out its full limits and that might not be enough to cover the damages in a particularly nasty accident.
This is when the injured party’s attorney sues you personally. Remember, your child is a minor until the age of 18 in most states. This means you could be “on the hook,” legally speaking, for their negligence.
This is a hotly contested concept in the insurance world. Just be sure to consider that you are not the first person in the U.S. to try to beat the system and save a buck.
Also consider that insurance companies and attorneys are better at this sort of thing than you are and they know how not to get beat.
Tip: If the person who’s telling you it’s OK to get your teen their own policy is the person who makes a commission by selling you that policy, they may not have your best interests in mind.
Final Thoughts on Teen Car Insurance
Contrary to what your checkbook is telling you, you might consider actually RAISING your liability limits when you add a teen driver to your policy.
YES, it costs more, but the goal of insurance is to keep you from going bankrupt in the event you cause someone serious bodily injury or property damage.
If all rational thought tells you (and all statistics tell insurance companies) that your teen is likely to cause an accident, you may want to cover your “assets” accordingly.
You can be sued for more than what your insurer will pay. The result of losing that court case may be wage garnishment or asset forfeiture.
So it may be prudent to consider a personal liability umbrella policy to supplement your car insurance coverage.
Believing you can only be sued for your auto insurance liability limits is a common insurance myth that can destroy your financial future in the blink of an eye.
We’ll say it again. SHOP your premium to see if you can save money when adding your teen driver…
Read more: 10 ways to lower your car insurance premium.