Teenage Car Insurance Coverage

Teens' average rates for car insurance in the US are $551.11/mo. In addition to traditional car insurance, teens may need PIP or uninsured motorist coverage.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 15, 2020

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Here's what you need to know...

  • Statistics from the Centers for Disease Control show that teen drivers have a one in four chance of crashing
  • According to Motor Trend, a safe option for a teen car is the 2008 Ford Taurus
  • The annual cost for a minimal collision policy for a teen driver can start as low as $250 per year
  • Motor vehicle accidents affect an entire family’s economic structure, costing an average of $8,900 in damages, lost work time, etc.

When you start thinking about the suggested auto insurance coverage for teens, it is best that you first familiarize yourself with the new driving laws.

Every year each state reviews and updates certain statutes as they pertain to the young and inexperienced driver. This applies to teens especially.

Since you are new to the regulations for younger drivers, start with the consumer alert issued by the National Association of Insurance Commissioners. You may find information here you never knew existed.

Before you start worrying about sky-high rates use your resources to see how the car insurance companies view your teen driver. You may have a pleasant surprise waiting for you, especially with the variety of discounts available.

Just because you have a new driver hitting the road does not have to mean bad news in the form of increased auto insurance premiums.

Unfortunately, teens tend to get a bad rap for their driving habits and they often carry the blame for unnecessary accidents caused by distracted driving.

When you review the latest statistics from the Centers for Disease Control showing teen drivers have a one in four chance of crashing, high teen insurance rates seem plausible.

Also, prepare yourself in advance by selecting the best levels of coverage for your teen driver. Do not assume that they require the same amount as you.

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Liability Bodily and Property Damage Protection

Liability insurance is always the first level of suggested auto insurance coverage for a teen driver. Not only is this required in every state, but it also shields your teen from accidents and safeguards their financial future.

Liability coverage is more like defensive car insurance. In the event that your teen hits someone or damages their property, their exposure to lawsuits and medical expenses remains limited.

Compare the rates between the least amount and approximately $100,000/$300,000 bodily liability and $50,000 for property damage. You may find the cost per year does not vary as much as you originally thought.

Liability insurance is also usually very cost-effective since the average rate for liability depends on several factors, including driving record and credit score.

However, since your teen will not have much of either at their age, the car insurance companies have little to work with.

Instead, they may opt for the obvious, geographical location and type of vehicle. Only having these two factors help in a way because they have a fresh start with zero strikes against them.

Unlike others who damage their driving record and must work to correct the negative history, your teen driver has a better chance of receiving a fair auto insurance premium by choosing liability only.

You may want to stop at this level of coverage, especially if they have an older vehicle with exceptional safety features.

A perfect example for a teen car is the 2008 Ford Taurus which Motor Trend gives a perfect five out of five stars for driver and passenger side impact resistance testing.

The front and rear occupant side impact ratings are just as impressive. Finally, scoring slightly lower with four out of five stars is its performance in the rollover category.

Purchasing a car that has optimal rates like these virtually ensures your teen and their friends will have a secure ride.

In addition to being safe, the 2008 Ford Taurus is not one of those flashy types of vehicles that call attention to thieves and vandals.

Your teen driver may not require comprehensive coverage in this case. Comprehensive coverage and other options will definitely start to increase the policy rate and most times are not even necessary.

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Collision Coverage

Collision coverage is always worth thinking about if you have the extra money because it will help repair any damages that are not always the result of accidents.

Your teen can misjudge the distance between your own garage and their vehicle. They could easily rip off their side mirrors or even back into the structure. In these situations, this suggested auto insurance coverage may prove very useful.

Even if an accident does occur, with liability your teen will not have the funds to repair their vehicle. Since liability only protects the victim in these cases, they will need to find ways to raise money themselves.

Not having collision coverage can ultimately lead to a drain on your budget. As the parent, you will no doubt have sympathy for your child and therefore, foot the bill yourself.

If you do select collision, be sure to recall two important facts. First, the amount of the deductible should be comparable to the value of their vehicle.

Many advise that a high deductible will keep the auto insurance premiums at a reasonable rate. However, the insurance company considers the value of the car when payment time comes around.

Secondly, use the coverage only when necessary, which means major damage. Just because you have coverage, that does not mean you need to file a claim for everything.

Think about the out-of-pocket costs in terms of the deductible. If you have a $500 deductible but the overall cost to repair is less, you might want to skip the claims process altogether.

The annual cost for a minimal collision policy for a teen driver can start as low as $250 per year.

If you apply for eligible discounts, like good student and driver training, the reduction by way of a certain percentage can offset the price. Remember, you can also qualify for a multi-car discount just by adding your teen to your policy.

Uninsured/Underinsured Motorist Coverage

Your teen will be on the road during different times of the day, which leads them to exposure levels of all kinds. Since a large percentage of drivers today do not have the correct amount of insurance, this is something worth purchasing.

In addition to having lower levels of coverage, some drivers have none at all. They are well aware of the state laws; however, they opt to take the chance of driving without protection.

Not bothering with auto insurance may cause problematic behavior, including leaving the scene of an accident. As they know the consequences they face, the majority choose to take off.

Leaving an accident scene leaves your teen at a major disadvantage.

Standard procedures for filing an accident claim require information on all parties involved. If you do not safeguard your teen from an uninsured or underinsured motorist, the car insurance company may not approve the claim.

If they do agree to make a payment, the amount may not be sufficient to receive justified compensation. The worst part is your teen may have to go without a vehicle because of someone else’s lack of better judgment.

Discuss the costs with your auto insurance provider and measure the risk versus the peace of mind factor. If you think, it is worth the extra expenditure, select this level for your teen.

Personal Injury Protection or PIP

When reviewing the latest report by the National Safety Council, one thing is very clear.

Motor vehicle accidents affect an entire family’s economic structure; even a best-case-scenario crash that only damages the vehicle and property costs an average of $8,900 in damages, lost work time, etc.

Personal injury protection for your teen driver might come in handy in several ways.

Primarily, PIP coverage is an added layer of protection for your teen. PIP coverage makes provisions for medical expenses and motor vehicle damage.

In addition, as their guardian, you may miss several days from work attending to their physical well-being. Not being able to work means you may lose wages and productivity time from your job.

With PIP, the money you collect can serve as a cushion while you are attempting to put your life back together.

If by some unlucky set of circumstances, other family members also suffer from the same fate during the crash, they too have full protection.

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Choose Your Levels of Coverage Wisely

As the adult and more experienced driver, you owe it to yourself and your teen to make the best decision regarding auto insurance coverage. For this reason, you must choose wisely.

Choosing wisely means you may not remain with your current provider.

Although you may have a great record with this company, they might not be the best selection when it comes to your teen driver.

The unfortunate reality is some car insurance companies will only take on a teen driver if they apply a major increase to the current policyholder’s annual premium.

Today, there is just too much competition out there for you to settle with this type of behavior. Perhaps your car insurance company expects you to remain with them out of loyalty, but you have every right to walk away.

One of the only ways to ensure that you receive fair treatment is to go shopping to find a new car insurance provider. Initiate this step before you inquire about rates for your teen driver with your current provider.

This way, you will automatically know if they plan to take advantage of your loyalty.

If you receive an estimate from three or four other car insurance companies that seem comparable, take this information to your auto insurance carrier to see if they will match the lower rates you have found.

See if their numbers match up. If not, exercise your rights and give them notice of your intent to cancel. If they really value you as a customer, they will work hard to retain your business. Otherwise, you know you made the right decision.

Monitor Your Teen’s Progress and Review Regularly

As your teen begins to improve their driving skills and grow older, they should see substantial drops in coverage amounts.

Depending on the period of your policy, you should start reviewing the numbers very closely. Most policies last between six months and one year.

It is easier to detect savings when you go over each level of coverage separately, rather than the final amount due. Be prepared with your previous policy for the most accurate evaluation.

You should also try to compare the dollar value to the percentage amount. Sometimes, percentage savings are higher.

At any rate, unless there is an incident during the policy period, during renewal the annual premium should reflect a different amount from your previous statement.

Do not forget to remain proactive, especially if your teen participates in any programs sponsored by their school or the Department of Motor Vehicles.

They can complete in-person or online courses that will dramatically reduce the amount you pay each year. Once they satisfy any of these classes, be sure to notify your car insurance company and watch those rates fall even faster.

Finally, keep your teen driver involved with the process. Keeping them involved will help ensure that they remain safe and smart drivers as they age.

Once they reach the point of branching out on their own, you will have provided them with a great head start as a candidate for low-cost car insurance.

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