When I turned sixteen, my father gave me the keys to a shiny blue 1998 Isuzu Rodeo—and the news that I’d have to pay for half of my insurance bill and all of my gas, in order to enjoy my new ride. I worked as a waitress at a retirement community earning $5.35 an hour to earn that $80 a month for my half of the insurance bill, and looking back, I’m so grateful for the lesson in financial responsibility (and I still miss that car).
Asking your kids to cover part of the cost of your skyrocketing car insurance bill is one way to manage the cost of adding them as a driver on your policy. But Jean Chatsky just wrote a great piece for Fortune with four other ideas that are worth sharing, too. I’ve excerpted her ideas below, adding my own comment beneath each tip. As for just how much you can save? Experts estimate that married couples spend an additional (brace yourself) 79 percent on car insurance when they add a young driver to their policy!
Fortune’s Secrets for Saving Your Teen on Car Insurance
1. Let The Insurer Track Your Driving
A number of big carriers have rolled out programs using what the industry calls “telematics.” Essentially, they’re electronics that lets the insurers see how good a driver you are. Progressive’s Snapshot, for instance, is a little piece of hardware that plugs into the bottom of the steering column of your car and transmits data back to the mother ship about how fast you’re driving, how hard you hit the brakes and the time of day you’re on the road.
StateFarm does something similar using onboard communication systems like OnStar. Allstate’s Drivewise – available in app form as well as a stand-alone device — is even more programmatic. It collects data on your speed, braking, miles driven and time of day you’re driving, then you can use that information to improve your savings. “Personally, when I started the program I was low on the braking area,” Allstate spokesperson Justin Herndon says. “I made an effort to identify the times I brake hard and realized it was as I was approaching red lights. So, I started slowing down…and gliding slowly to a stop.” He jumped from 10% savings to 19% within a few weeks. The maximum discount under the program is 30%.
Quoted says: Telematics sound fantastic but we’re assuming Chatsky is writing here about putting them in the adult drivers’ cars, as we can’t see teenage driving styles leading to a whole lot of discounts. Also, our big remaining question with telematics is, what happens if you’re not that great a driver according to the machines? Is there any punishment regarding your rates for discontinuing use of the program?
2. Make sure you’re getting the good student discount.
There are some auto insurance discounts you get automatically – such as discounts for raising your deductible or buying a car with an anti-theft device. The good student discount for good grades isn’t one of these. You have to call your insurer or agent and ask for it. Discounts vary by state. At Allstate they go as high as 20%, but average a 10% off says Herndon. Typically, you need at least a B average or better to qualify. At other insurers, the discounts can go even higher. And while you’re talking to your insurer, ask about other discounts specific to your company. Liberty Mutual, for instance, offers a discount for taking an online driver safety program as well as signing a safe driver contract with your teen.
Quoted says: Also remember that students attending college far from their home state could be eligible for something called a “resident student discount,” which at Allstate, for example, can slash the parents’ policy by up to 30 percent.
3. Buy used (or hold onto the cars you already have).
There’s a reason – of course – that teens are more expensive to insure. They have substantially more accidents. (Boys have more than girls, which is why they’re costlier still.) This argues for putting them in cars that are safe, but a bit seasoned. “That way if your child is involved in an accident, it’s a less expensive loss,” says Robert Hartwig, president of the Insurance Information Institute. “Besides, if you have two cars and they’re both a few years old, you’re going to pay less than you will with one new car, one old car, and especially less than having two new cars.”
Quoted says: While it’s true that older cars are often less expensive to insure, it’s worth making the distinction that this is usually because less coverage is purchased, not because they’re necessarily inherently cheaper to insure. In fact, driving a new car can also get you discounts on everything from anti-lock brakes to daytime running lights. And for some insurers, just driving a car less than three years old can save you some money (including Travelers.)
4. Bump up your own liability insurance.
“The riskiest time for you as a parent from a liability perspective is likely when your teen begins to drive,” Hartwig says. “The vehicle is yours. You are on the policy. And all of the assets in your household can be considered fair game in a lawsuit.” The amount on your basic auto insurance policy often isn’t enough. “You should be able to buy $1 million of liability coverage that sits on top of the liability coverage provided by your auto policy for $250 to $300. If you want a second million it will cost even less.”
Quoted says: We agree completely here. Remember that according to the CDC, per mile driven, teen drivers ages 16 to 19 are three times more likely than drivers aged 20 and older to be in a fatal crash.
Know of another discount Fortune or Quoted forgot? Have another creative way you’ve managed the additional cost of adding a teenage driver to your policy? Let us know!