Adding A Teenager To Your Car Insurance Policy Without Blowing Your Budget

Posted on 24 August 2011 by Tony Santos

You knew the day would eventually arrive. Your teenager has earned a driver’s licence. With it, he or she wants the opportunity to drive your car, which means you need to make sure you’re properly insured. A lot of parents dread the increase in their insurance premiums, but realize that adding their teens to their policies is a necessary step toward building their driving history. The challenge is minimizing the cost of doing so. We’ll provide a few tips below for smoothing the process while keeping your rates at a reasonable level. You’ll also learn how to determine when it’s time to look for another insurer.

The Best Time To Add Your Teen To Your Policy

Technically, this depends on the type of driver’s licence your son or daughter has earned. A level one licence – referred to as a Class 7 everywhere in Canada except Ontario, where it is called a G1 – may not warrant a major change in your policy.

Your insurance company will want to know that a newly-licensed driver will be operating your vehicle. But since the person can only do so when he or she is accompanied by an experienced driver, the increased risk is minimal. Thus, your insurer may make a note of it on your policy, but do little else. The safest approach is to inform your insurer, and let them decide whether your teen must be formally added to your policy.

Things change when your son or daughter earns a level two driver’s licence. This type of licence is called a Class 5, or a G2 in Ontario. It allows your teenager to operate a vehicle without supervision; he or she does not need to be accompanied by an experienced driver.

This poses a higher risk of loss for your insurance company, which will require that you formally add your teenager to your policy. At that point, you can expect an increase in your rates.

What Influences Your Car Insurance Rates?

One of the main factors that influences an insurance company’s rate calculation is the policyholder’s driving history. Past traffic violations, convictions, and accidents are used to determine the risk of insurance loss assumed by an insurer when extending coverage. When the driver – in this case, a newly-licensed teen – lacks history behind the wheel, the insurer must rely on other criteria.

Teenagers who complete an approved driver training course enjoy lower rates. Completion of the course demonstrates that the driver has learned sufficient safety skills. In fact, many insurance companies extend this conditional discount to all policyholders, regardless of age.

Another factor that continues to affect rates for teen drivers is gender. Girls have traditionally enjoyed lower premiums than their male counterparts since they are believed to be more responsible behind the wheel. This is slowly changing. The Wall Street Journal reported that a recent survey showed female teenage drivers beginning to take many of the same risks as male teens. Over the next few years, this may cause the rate disparity between male and female teenagers to narrow.

How To Minimize Your Teenager’s Impact On Your Rates

Fortunately, there are plenty of ways to prevent your premiums from skyrocketing after adding your teen to your policy. First, consider discontinuing your collision and comprehensive coverages if your vehicle’s market value is low. If you’re uncomfortable doing so, at least raise your deductibles. Collision and comprehensive are two of the most expensive optional coverages, and thus dropping them can result in large savings.

Second, ask your insurer whether they offer a discount for students who are enrolled in college, and live away from home. If your teen’s access to your vehicle is limited, there is less risk to your insurance company.

Third, ask about other discounts. For example, does your insurer offer a discount to students who receive good grades? Can you save money by combining your auto and property insurance policies under a single company? There are numerous discounts available that many consumers never learn about because they neglect to ask.

When It’s Time To Consider Another Insurer

One of the most effective ways to trim your car insurance costs when adding your teenager to your policy is to comparison shop between insurers. Don’t assume your current company will continue to offer the lowest rate, even if they have in the past. Always price shop when your coverage is about to expire, or a major change to your policy occurs. You might find that you can save thousands of dollars each year by switching to another company.

Insuring your teenage driver does not have to be expensive to the point of blowing your budget. Shop around. The difference in rates between insurers is larger than most consumers realize.

Categorized | Car Insurance, Car News, Car Tips

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