Remember the days of hanging out with friends and driving without another adult in the car? Did we even think about the insurance costs? Times have changed, and if adding a young driver to your policy is in your future, you need to be ready for a large added expense.
The Insurance Institute for Highway Safety and the Highway Loss Data Institute report that teen drivers crash three times more often than drivers 20 and older. The Pennsylvania Department of Transportation reports that in 2013, 24.9 percent of drivers in the 16 to 21 age group were involved in crashes. Driver inexperience and less cautious driving are characteristics that lead to all young drivers having higher rates.
According to Insurance.com, adding a teen to a policy in Pennsylvania could increase your policy by 146 percent. While policies vary based on numerous factors, financial experts advise being prepared for the unavoidable expense when a teen driver is added to your coverage. The Pennsylvania Institute of Certified Public Accountants offers the following ways to save some money on their protection.
- Ask for discounts. Most insurance companies, especially those that have been insuring your family for years, offer safe-driver, multicar, and good grade discounts. There may be other discounts, but the key is to meet with your agent to find the discounts that work best for your family.
- Forgo sports cars. All kids want to look cool, but insuring a sedan -- especially one equipped with safety features such as airbags, anti-lock brakes, and daytime running lights -- will likely cost much less than insuring a souped-up sports car. After narrowing down car choices, ask your agent for an insurance quote on each model.
- Can you skip collision? If your teen drives an older model car, it may be worth it to omit collision coverage. The cost of coverage may be more than the value of the car.
- Increase your deductible. Increasing a deductible generally lowers premiums, but be sure the deductible is an amount you can afford to pay out of pocket should an accident occur.
- Let your teen borrow your car. Insuring a teen to drive your car as an occasional operator could be cheaper than insuring your teen as a primary operator on another car.
- Monitor their driving. Some insurance companies can install a device that monitor’s your teen’s driving habits and reports information (such as instances of speeding, seat belt usage, hard braking) back to the insurer. You can also purchase a device that does not report to your insurance provider. (See Consumer Reports, “How to Track Your Teen Driver.”)
While it will likely increase a family’s premium, it’s important to discuss increasing liability coverage with your agent. This will provide added protection for the additional friends that will likely be riding as passengers while your teen is driving.
A CPA can help
If there’s a teen in your family, buying a car, paying for insurance, and saving for college are just a few of the financial issues you’re about to face. A CPA can help you analyze your current situation and determine the best course of action with regard to your personal financial plan for your family. To find a CPA by location or area of expertise, ask friends or family for recommendations or in Pennsylvania, use the CPA Locator.