It’s no secret that car insurance for new drivers is expensive. Teens are inexperienced drivers, which makes it risky for car insurance companies to cover them. As a result, they have higher rates than most other demographics. The high costs of insuring a teenager can really put a strain on your wallet, especially when you’re trying to balance the budget for your entire household. Keep reading to find out how to keep insurance costs down as much as possible. We’ve also included information on how to add a teen, student, or new driver to your insurance policy, as well as which auto insurance companies might be the best fit for your family.
Why Teens and Students Need Car Insurance
Considering how much it costs, it might be hard to comprehend why you need to get car insurance for a newly licensed driver in your household. However, it’s the law. Everyone who drives needs car insurance, and teens and students are no exception. The minimum insurance requirements set by your state’s laws determine the amount and type of auto insurance coverage that you need. On the bright side, the laws that apply to you also apply to your teen, so you won’t be required to increase your coverage limits. However, you may want to check how much it would cost to add extra liability coverage, which will give you better protection if your inexperienced driver causes a major accident.
Auto insurance is mandatory so that you’re covered if you’re hit by someone else, and if you hit someone, they’re covered. Insurance will reimburse you (or the other driver) for medical and injury costs, property damage (to the vehicles involved as well as other property damaged as the result of a crash), and other financial losses related to a crash. A full coverage car insurance policy also covers you from losses related to theft, vandalism, and other incidents like floods and fires. If you’re adding a vehicle to your policy for your teen to drive, that vehicle needs at a minimum all the protection required by your state. If your teen isn’t getting a vehicle of his or her own, but will be driving a vehicle owned by another member of your household and already covered by insurance, you’ll still need to add your teen to your policy. That is because insurance covers the driver as well as the vehicle, and the premiums change according to the risk posed by that driver.
From the perspective of your insurance company, every moment your vehicle is out on the road, it’s exposed to additional risk, and having a teen driver behind the wheel instead of an experienced adult makes the situation even more risky. The consequences will be serious if your newly licensed teen driver was behind the wheel of your car during an incident and your insurance company was not informed that your teen would be driving. In that situation, you wouldn’t be covered, so you would need to pay out of pocket or could be sued for any property damage or medical costs related to that incident. Your auto insurance company could also decide to drop your coverage, which will make it harder and more costly for you to get car insurance from another company.
In short, it’s important to get car insurance for your teen or student driver as soon as it’s required by your insurance company. In most cases, that would be when your teen receives his or her driver’s license, though you should check with your insurance company to make sure you don’t need coverage for a teen driver with a learner’s permit. If your teen driver will not be permitted to drive any of the vehicles owned by your household, for whatever reason, you should discuss this situation with your insurance agent.
Why Is Teen Car Insurance So Expensive?
Car insurance is all about managing risk (you can learn more about how car insurance works here). Your insurance company tailors your insurance policy and how much it will cost you by figuring out how likely you are to cause an accident or the odds that your car will be damaged in some other way. Your car is more at risk of being involved in a crash at the hands of an inexperienced teen than when it’s being driven by a driver in any other demographic group. You may feel like you or your teen are being unfairly targeted or picked on when you see how much your rates are going to increase by adding your teen to your auto insurance policy. That’s not the case, however.
Statistically speaking, teen drivers are the most dangerous out there, and until your teen demonstrates that he or she is responsible behind the wheel, your insurance company is going to charge you a lot of extra money to manage that considerable extra risk.
According to the Centers for Disease Control and Preventio (CDC), motor vehicle crashes are the leading cause of death for teens in the United States. In 2017, six teens between the ages of 16 and 19 were killed in a car crash every day. Furthermore, data from the CDC shows that drivers between the ages of 15 and 19 are responsible for nearly 8% of the total costs of injuries from motor vehicle accidents, even though this age group is just 6.5% of the overall population. According to the California Department of Motor Vehicles, drivers between 16 and 19 have the highest average rates of crashes and traffic violations.
Data from the National Highway Traffic Safety Administration (NHTSA) breaks it down a bit further. In 2017, speeding was a factor in 31% of teen crash fatalities with male drivers between the ages of 15 and 18, and 18% with female drivers of the same ages. For drivers 25-34, speeding was a factor in 26% of fatal crashes with males, and 14% with females. As drivers age, the figure continues to drop, with speed being a contributing factor in only 7% of crashes involving male drivers over 75 years of age.
When a teenage driver has a teenage passenger, the driver is about two and a half times as likely to drive irresponsibly. Driving with multiple passengers increases that risk even more, to about three times. Seat belt use is also the lowest among teen drivers, according to NHTSA data, which increases the likelihood of a crash becoming fatal. All in all, teen drivers are about twice as likely to be involved in a fatal crash as adult drivers. All of these factors contribute to the likelihood of your teen being involved in a fatal crash, and it’s why auto insurance for teens is so expensive.
It takes years to establish a good driving record and a reputation for being a responsible driver. However, teens who practice good driving habits, avoid tickets or moving violations, and don’t get into any accidents will benefit from reduced insurance costs over time.
How to Save on Car Insurance for Teens and Students
You’ll likely qualify for a discount when you decide to buy auto insurance for your new driver, but you’ll have to do your research and ask your insurance agent for help if necessary. We’ll go over the common discounts for teens and take a look at the discounts offered by each of the car insurance companies we’ve ranked.
Good student discounts are probably the most commonly advertised for this age group. You may be able to save between 5% and 25% for maintaining good grades, usually defined as a B average or better. You should also look into discounts for approved driver training or defensive driving courses, which may come with a discount of 5% or more.
Your household should qualify for USAA membership if your teen is a member of the military. With this insurer, you’ll likely have some of the most affordable insurance rates in the industry. Many other insurance companies offer military discounts as well, which you should ask about if you qualify.
Over time, if your teen maintains a clean record, he or she may be eligible for a good driver discount. However, it typically takes at least three years or more to qualify, depending on the insurance company.
If your teen is getting his or her own vehicle, you should be eligible for a multi-vehicle discount. Other discounts include those for low mileage, if your teen drives his or her own vehicle less than 10,000 miles per year. You may also qualify for a family plan discount, sometimes offered to parents with unmarried children 21 years old or younger in the household.
There are also tracking or monitoring programs that some insurance companies offer, but there are tradeoffs involved. These programs work by tracking driving habits with a device installed in the vehicle or a smartphone app. You may qualify for a discount, generally between 5% and 50%, if the insurance company likes what they see. It’s a risk, however, because you’re handing lots of personal data over to the insurance company, including where you go, how often, and so on. Plus, the company is not actually obligated to provide a discount in exchange for participation. In fact, they can even raise your rates if they think the data shows risky behavior.
Now, let’s break these potential discounts down by company. Some companies may offer specific details about the amounts of certain discounts, while others may not.
USAA Car Insurance Discounts for Teens
If you qualify for USAA membership, your new driver may be eligible for discounts for being a good student or a member of the military, or for completing an approved defensive driving course or extra driver training. A safe driver discount for maintaining a good driving record is available, and a discount is also available if he or she drives a new vehicle. There are also discounts for teens who drive a low number of miles each year, or if the vehicle is stored while he or she is away at college. Additionally, you may also be given discounts for sticking with USAA for several years, or for having multiple insurance policies with the company.
Geico Car Insurance Discounts for Teens
Teens may qualify for unspecified discounts for driver education or defensive driving courses. The good student discount saves 15%. The good driver discount for being accident-free for five years saves 26%. If your teen or student is a member of the military, Geico extends a discount up to 15%. The multi-car discount will save the household up to 25%. Geico also offers a multi-policy discount, but the amount you’ll save depends on the policies.
Nationwide Car Insurance Discounts for Teens
Drivers between the ages of 16 to 24 who maintain a B average or higher can get a good student discount with Nationwide, though the company doesn’t specify how much of a discount. There are additional discounts as well, including separate accident-free and safe driver discounts for five years free of accidents or major moving violations. Combining your home and auto insurance can also save you an average of $710 per year with Nationwide. You can also talk to a Nationwide agent about discounts with the company’s SmartRide usage-based insurance program.
State Farm Car Insurance Discounts for Teens
State Farm offers a tracking program called Drive Safe & Save, though the company doesn’t specify potential discounts. Drivers under the age of 25 and new drivers can save up to 15% with the Steer Clear discount after three years free of moving violations or at-fault accidents. If you’ve been accident-free with State Farm for three years or if you’re new to State Farm, you can also get a discount. To save money right off the bat, check out the driver training discount for drivers under age 21, the good student discount of up to 25% for students under age 25, a multi-vehicle discount of up to 20%, and a bundling discount of up to 17%.
American Family Car Insurance Discounts for Teens
There are several discounts from American Family that are specifically for younger customers. These include a good student discount, a teen safe driver discount, and a discount for drivers under age 25 who volunteer 40 hours per year at a nonprofit organization. Note that you’ll have to talk to an agent to learn more about how much you’ll actually save. American Family also offers a tracking program called KnowYourDrive, with discounts up to 20%. Other incentives include a low mileage discount for racking up less than 7,500 miles a year, a good driving discount (discuss with an agent for details), and discounts for multiple vehicles and bundling with another types of insurance.
Farmers Car Insurance Discounts for Teens
Farmers is a little trickier, since the discounts offered by this company vary by state. However, Farmers customers across the board will earn discounts for safe driving and combining multiple insurance policies.
Progressive Car Insurance Discounts for Teens
If your teen driver is under 18, you’ll immediately qualify for a teen driver discount from Progressive. There’s also a good student discount if your teen maintains a B average. However, Progressive notes that these discounts vary. After three years with a clean record, the safe driver discount can net average savings of 31%. You can also enroll your teen in the Snapshot tracking program, which provides an average discount of $145 per year. Progressive’s multi-car discount is good for average savings of 10% and the bundling discount is good for average savings of 5%.
Allstate Car Insurance Discounts for Teens
Allstate offers a Smart Student discount for unmarried drivers under age 25 who maintain good grades, complete Allstate’s teenSMART driver education program, or attend school 100 miles or more from home. Allstate also offers the usual multi-vehicle and bundling discounts, though they don’t specify potential savings.
Travelers Car Insurance Discounts for Teens
Travelers offers an 8% discount for students who complete an approved driver education course, as well as an 8% discount to students with a B average. There’s also an IntelliDrive tracking program that offers potential savings of up to 20%. In addition, if every driver in your household has been free of accidents and violations for three years, you can save up to 10%, and that number goes up to 23% after five years. By adding another car to your policy for your teen, you can also save up to 8%, and you can save up to 13% by bundling policies together.
How College Students Can Save Money on Car Insurance
Many college students may have aged out of the teen demographic (or they will soon), but getting car insurance for drivers in their early 20s is still quite expensive. College costs lots of money as it is, so it makes sense to find as many ways as possible to save extra cash. Cutting costs on auto insurance is always a good idea whenever possible. Let’s take a quick look at ways to save on car insurance while enrolled in college.
It’s worth checking with your insurance company to see if being enrolled in the military, the National Guard, or perhaps even an ROTC program through your school entitles you to a military discount. The requirements for a military discount vary amongst insurance companies, but most insurers offer a discount to active military members and veterans. It’s always worth asking.
Another way to save money on car insurance while enrolled in college are with good student discounts. The definition of a “good student” can vary from company to company, so check with your insurance provider to learn more about their requirements. However, your company’s requirements are probably the same as they were in high school, based on GPA or class rank. Discounts can be anywhere from 5% to 25%, but they commonly fall into the 10% to 15% range. Insurance companies believe a driver who does well academically is generally responsible, and thus will take fewer risks while driving. This often leads to good student discounts.
College students who live on campus far away from home and don’t take a car to campus are also usually eligible for a specific discount. The idea here is that if a college student isn’t able to drive the car most of the time, the car is exposed to less risk and should cost less to insure. If you are the parent of a college student who spends the school year 100 miles or more from home, check with your insurance company to see if you are entitled to a discount. That discount varies by insurance company from as little as 5% to as much as 35%.
Should Teens Get Their Own Car Insurance Policy?
It’s fair to wonder if teens are best off with their own insurance policy, or if they should be added to the parents’ or household policy. In general, you’ll save more money by adding teen drivers to the existing policy, or shopping for a new policy for everyone in the household, instead of setting teens up on a separate policy. It will likely be more expensive to put a teen driver on a separate policy than adding that teen to a parent’s policy or a policy that covers all vehicles in the household. Additionally, teens on their own won’t qualify for common discounts like a discount for bundling home and auto insurance together or as multi-vehicle discounts. These discounts can go a long way toward making the cost of a teen’s auto insurance more palatable.
However, there are some potential downsides to adding your teen to your auto insurance policy.You’re likely to see your rates go up, and you’ll lose any privileges you may have enjoyed – such as a good driver discount or a discount for being claim-free – if your teen racks up tickets or causes an accident. Additionally, you may be liable for any out-of-pocket costs caused by your teen’s driving that exceeds your policy limits, depending on your state’s laws. Despite the potential downsides, if your teen lives in your house, adding him or her to your policy is almost certainly the best course of action.
How to Add a Teen to Your Car Insurance
If your teen is approaching driving age, it’s time to figure out how to add him or her to your car insurance policy. It’s best to be prepared ahead of time. Don’t wait until the permit has been issued, because you’ll probably be under enough stress already.
The first step is to find out when you actually need to add your teen to your policy, and for that, you should reach out to your current insurance company. In some cases, it might be as soon as the permit is issued; in others, you might get lucky and be able to wait until the driving test is over and the license is in hand. Then, you should get a quote from your current insurance company. Use that quote to shop around and see if you’re better off switching insurance companies. While you’re shopping around, be sure to ask about any discounts that might apply to your household.
Whether you stay with your current company or switch for a better deal, ensure your teen is on the policy at the appropriate time. Then, be prepared to repeat the last few steps of this process on an annual basis, or whenever your policy is up for renewal. Keep on top of discount opportunities, too. As previously mentioned, good grades earn discounts at most major insurance companies, and some may offer additional cash off if your teen completes approved driving courses.
In between renewal periods, you can help your teen develop good habits behind the wheel. This helps your child, your family, and everyone else on the road stay safe. Furthermore, even the most minor of driving offenses tend to have more severe consequences for a teen driver than for an adult. That adds up to increased costs for you, both in the immediate term and potentially for years to come.
Before you start calling around, it might be best to brace yourself for the financial hit. As you probably suspect, it costs a lot of money to add a teen driver to a household’s insurance policy. Newly licensed drivers – especially teenagers – are the riskiest drivers out there, and you’ll pay for it.
According to insure.com, the average rate increase for adding a teen driver to a household’s insurance policy is 161%. In general, you should be prepared for your insurance rates to go up anywhere from 100% to 200% when you add your teen to your policy. You’ll even spend well over 200% in some instances. In New Jersey, for example, the average rate increase is a whopping 223%. Parents in Arizona, California, Illinois, Louisiana, Nevada, and South Carolina all pay an average increase of over 200%. States with the lowest average rates include Ohio at an average of 101%, Montana at an average of 103%, Pennsylvania at an average of 118%, South Dakota an average of 122%, and North Carolina at an average of 123%. However, there is an exception to this rule if you live in Hawaii, because state laws don’t allow insurers to factor age into the rate algorithms. You can take a look here to see what to expect for your specific state.
The Best Car Insurance Companies in 2020
Our Car Insurance Ranking
The Cheapest Car Insurance Companies in 2020
Average Annual Rates:
- USAA: $885
- Geico: $1,168
- State Farm: $1,234
- Travelers: $1,267
- Progressive: $1,373
- American Family: $1,391
- Farmers: $1,682
- Nationwide: $1,864
- Allstate: $1,880