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Cut the cost of insuring your teen driver

The fact that we let teenagers drive is a miracle of faith -- and denial.

It's not just that adolescents are awash in hormones. It's that their brains are still very much under construction. Recent research indicates that important mental functions, such as reasoning, self-control, judgment and emotional regulation, often don't mature until the late teens, well after many of these kids are already on the road.

 

"The first month, they're fine," said Joe Annotti, the father of two sons and spokesman for the Property Casualty Insurers Association of America. "Then they think they know everything about driving and safety . . . (and) pretty soon they're flying 60 mph down a back street to get to school."

Unfortunately, inexperience combined with lack of judgment helps explain why young drivers are more likely to crash and to die:

Car crashes are still the leading killer of people age 15 to 20.

Young drivers are three times as likely to die in a crash as those aged 25 to 64.

The younger the driver, the more accidents: The crash rate for 16-year-olds per million miles driven is nearly three times as high as for 19-year-olds, and nearly six times as high as drivers aged 20 to 24.

It's no wonder your car-insurance premium spikes 50% to 200% the minute you add a teen driver. Insurers aren't about to shoulder that increased risk of destruction and death without your help.

A couple in San Diego, for example, would have paid an average of $2,324 annually for auto insurance before adding their teenage son to the policy, according to the California Department of Insurance's 2003 auto-premium survey.

Adding Junior would boost the tab to $4,562, a 96% increase. A ticket or accident could boost the tab $1,000 or more -- sometimes much more.

Still, there are ways to bring down the costs. I interviewed several insurance-industry executives for the inside scoop on how they saved money when their own kids got driver's licenses. The insights they offer could help lessen the financial pain you're about to experience.

 

So here's your battle plan:

Find out how your insurer assigns drivers to cars

This differs from insurer to insurer and can make a huge difference in the premium you pay.

If there are three drivers and two cars in your household, for example, some insurers will assign the driver who's the most expensive to insure (your kid) to the car that's the most expensive to insure. That's the case at Allstate, according to spokesman Bob Daniels, who said the policy helps the insurer cover the extraordinary risks of young drivers.

 

Obviously, though, such an arrangement can cause your premium to double or even triple overnight, particularly if you have new or luxury cars. If that's the case, it might be cheaper to get your teen his own car, especially if it's an old beater that just sits in the driveway most of the time.

 

Another option: Switch insurers. Some companies allow you to make the choice of assigning drivers to cars. State Farm spokesman Bill Sirola said he saved money by designating his teenage daughter as the driver of the older of the couple's two cars.

 

In general, you're better off keeping the teen on your policy than getting her a policy of her own. But if your child will have her own car, you might want to get quotes for both approaches, just to make sure.

Keep those grades up

It's kind of an open secret in the insurance industry that straight-A students aren't really that much safer than C students. But many insurers still give a 10% to 25% discount to teenagers who maintain a B average or better because these kids are seen as better future risks.

"Long-term, they want the A student as a customer," Annotti said. Better students are seen as "more responsible."

Some insurance executives made their children's driving privileges contingent on maintaining good grades. One C and the keys are taken away until next semester. Talk about a motivator.

Take driver's ed

 

Here's another way to knock 5% to 15% off many insurers' prices, even though these short-term courses aren't effective in reducing future accidents, according to studies published by the American Journal of Preventive Medicine.

What really works to curb crashes is a much longer, slower teaching process. That's why many states now insist on 50 hours of supervised driving, far more than the six to eight hours offered by most high-school courses. (More on that below.)

But take the break if you can get it, since driver's ed is a good start. Also, most insurers have videos and instructional booklets on driver's safety and may give you an additional price break for using those.

 

Jack up your deductibles

Insurance executives know that higher deductibles make more financial sense than lower deductibles, but I was surprised how many of them waited to put that knowledge into action until the financial pain of adding a teenager to the policy forced the issue.

Ron Lovatt of the Automobile Club of Southern California boosted his deductibles from $500 to $2,000 when his daughters, now 19 and 18, reached driving age. Annotti, who has two sons aged 17 and 20, increased his potential out-of-pocket cost from $250 to $1,000 when the elder started to drive.

 

Higher deductibles can reduce your premiums as much as 35%, and it's simply smarter to use your insurance for the big disasters rather than covering the small stuff you can pay out of pocket.

Take your college student off the policy

 

This only makes sense if a) he won't have a car and b) you can trust your kid not to drive while he's away or home on short breaks. Otherwise, you are literally risking your family's financial health. If he causes a serious accident while not insured, you could be sued and wind up bankrupt.