How to Lower Insurance Rates for a Teen or College-aged Driver
For those of you with children who are old enough to drive, auto insurance is expensive; laughable, absurd, crazy expensive.
On average, adding a driver between the ages of 16 and 21 to your auto insurance policy can increase your rates 50% to 100%+ according to the Insurance Information Institute. The reason for the drastic increase: younger drivers are inexperienced. They are less aware of their surroundings, tend to drive too fast and are less responsible. Stated another way, a younger driver is more likely to cause a car accident than a 45-year-old driver. To account for this risk, insurance carriers require more money to insure teenage and college-aged drivers. To add insult to injury, in the (likely) event your child gets into a crash, your rates will skyrocket.
So what is a parent to do?
One option: lower your coverage. If you lower your coverage: (1) you could face exposure (i.e. lawsuit) in the event that you cause a car accident and/or (2) you could be out of luck if someone crashes into you and you don’t have enough (or any) uninsured motorist coverage. Uninsured motorist coverage pays for YOUR damages (i.e. medical bills, lost wages, pain and suffering) if YOU are injured in a crash due to the negligence of another.
Another, possibly better option: remove your child from your policy. Did you know that you are NOT legally required to include your child on your car insurance policy IF their own vehicle is paid outright? Although it may seem counterintuitive, buying your child his/her own vehicle could actually SAVE you money without reducing your coverage.
Let’s assume you have the following rates:
Without your child on your policy:
| Coverages | Limits/Deductible | Veh 1 | Veh 2 |
|---|---|---|---|
| Bodily Injury Liability | $100,000 / $300,000 | 200 | $205 |
| Property Damage Liability | $50,000 | $150 | $160 |
| Uninsured Motorist Coverage | $100,000 / $300,000 | $100 | $105 |
| Comprehensive | $500 deductible | $80 | $100 |
| Collision | $500 deductible | $250 | $280 |
| Total | $780 | $850 |
Total Premium: $1,630 ($780 + $850)
Adding your child on your policy:
| Coverages | Limits/Deductible | Veh 1 | Veh 2 | Veh 3 |
|---|---|---|---|---|
| Bodily Injury Liability | $100,000 / $300,000 | $200 | $205 | $400 |
| Property Damage Liability | $50,000 | $150 | $160 | $300 |
| Uninsured Motorist Coverage | $100,000 / $300,000 | $100 | $105 | $160 |
| Comprehensive | $500 deductible | $80 | $100 | $160 |
| Collision | $500 deductible | $250 | $280 | $500 |
| Total | $780 | $850 | $1,560 |
Total Premium: $3,190 ($780 + $850 + $1,560)
Over five years, the difference in premiums by adding your child (with his/her own car) to your policy is ~$7,800. Add another $500 a month in car payments and you’re paying an additional $6,000 per year in car payments, or $30,000 over five years. Total over Five years: Insurance + Car Payment: $37,800.
Even if your child does not have his/her own car, by permitting them to drive your car(s) your premiums may double to account for the heightened risk. Remember, you are required to advise your insurance carrier that you have a licensed driver living with you. This is non-negotiable.
Don’t Try to Beat the System
If you are involved in a crash, and the insurance company checks to see if anyone in your family is a licensed driver, they may exclude your coverage for the material misrepresentation. In most cases, you (i.e. parents) have assets (i.e. exposure), not your child. Under this scenario, you are paying a premium for your teenage or college aged driver to receive higher coverage limits than he/she needs.
If possible, you want to untether your child’s exposure from yours. What if you bought your child a car outright for $20,000 and paid for their auto Insurance? You would not be on the car’s title – only your child. Under this scenario, you could keep your insurance premiums untouched. Your child would be separate and apart from you in the event they were involved in a crash. They have their own coverage.
Your child’s policy (with lower limits of coverage):
Coverages Limits/Deductible Veh 1
Bodily Injury Liability $10,000 / $20,000 $100
Property Damage Liability $10,000 $75
Uninsured Motorist Coverage $10,000 / $20,000 $50
Comprehensive $1,000 deductible $50
Collision $1,000 deductible $200
Total $475
Under this scenario, over five years, you would save $5,425 in premiums ($7,800 – $2,375).
The savings are significant because your child’s coverage is significantly LOWER than yours. In many cases this isn’t a problem as your child (likely) does not need as much protection. They don’t have any assets and they are less likely to be (seriously) hurt in a crash.
You are protected. You have (correctly) maxed out your uninsured motorist coverage to your bodily injury coverage. You have (correctly) maxed out your uninsured coverage to your child’s bodily injury coverage. Your child has insurance at a more reasonable rate. You save money.
A Few Caveats
You have to buy your child’s vehicle outright. You cannot be the co-signer on the loan.
Your child cannot drive your vehicle(s). If so, you may not be covered in the event of a crash. Your agent may recommend that you “exclude” your child as a driver on your vehicles.
This option only applies after your child turns 18 years old. Parent(s) can be held responsible for the acts of their minor child in the event they cause an accident.
In Florida, a parent or guardian of a minor must sign and verify the minor’s application for a driver’s license and “any negligence or willful misconduct of a minor under the age of 18 years when driving a motor vehicle upon a highway shall be imputed to the person who has signed the application of such minor for a permit or license, which person shall be jointly and severally liable with such minor for any damages caused by such negligence or willful misconduct.” See Florida Statute 322.09(2). As a result, if you decide to take your minor child off your auto insurance, you still could potentially be on the hook for damages.
Depending on you and your child’s financial situation and medical history, this may not be the best option for you. At a minimum, it does not hurt to ask your insurance agent if this option is available. If you need the name of a qualified insurance agent who can price out multiple carriers, please reach out to us for a recommendation.
Finally, if at all possible, do not drop/remove your uninsured motorist coverage in an effort to reduce costs. Uninsured motorist coverage protects YOU in the event someone crashes into you. We recommend that you MATCH your uninsured motorist coverage with your bodily injury coverage. Buy as much uninsured motorist coverage as you can afford.
Hopefully this tip saves you money so you can keep your higher limits of coverage.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Please consult with a licensed insurance agent when determining which auto insurance to purchase.
If you have questions about a motor vehicle accident, contact Lyons & Snyder in South Florida at 954-266-0812 or contact us online for a free consultation with a Florida car accident attorney.
