Here's How Teen Drivers Can Save Money on Car Insurance

For many people, the teen years are full of important milestones. You learn to drive and earn your license. You graduate from high school and go on to college. You have your first date, first school dance, first kiss. While some crucial moments in a teenager’s life are free, many milestones do come with a cost. Although the bank of mom and dad might help to cover some of the expenses of being a teen, it’s likely that your parents expect you to take financial responsibility for at least some of your activities and interests.

For that reason, it can be particularly helpful to learn as much as you can about money while you’re a teenager. Learning how to save money and reach financial goals when you’re young can also pay off in the long run. Once you’ve gotten the hang of living frugally and cutting costs, those skills will stick with you throughout the rest of your life.

See the rest of the teen driver guide.

Car Insurance Tricks For Young Drivers: How To Save Money On Insurance

After the cost of buying a car, one of the heftiest car-related expenses for a new driver is the cost of car insurance. When you start driving, the odds are likely that your parents will add you to their car insurance policy, which will typically make their rates increase. Still, being a driver on your parent’s plan is often considerably cheaper than getting an insurance policy on your own as a teenager.

While teen drivers are the priciest to insure due to their inexperience and higher risk levels, there are things you and your folks can do to lower the cost of car insurance:

Take and pass a driver’s ed course. Many insurance providers offer teen driver discounts to students who successfully pass a registered driver’s education class. If your school doesn’t have driver’s ed, a local community center or YMCA might have a program.
Do well in school. Getting good grades doesn’t only help you get into college. It can also save you money on car insurance. Usually, insurance companies offer discounts to students who maintain a “B” or higher average.
Ask about multi-vehicle discounts. If you’re on your parent’s insurance policy, the company will most likely offer a discount for insuring multiple cars on the same plan.
Find the right car. The car you drive and the car assigned to you as part of your family’s insurance policy will affect your premiums. Ideally, you’ll be attached to the least expensive car to insure on your family’s plan. Some cars have more expensive insurance costs than others, so when you’re shopping around for a vehicle, don’t just pay attention to the sticker price. Think about the overall cost of ownership, including insurance costs.
Consider a higher a deductible in exchange for a lower premium. For some teen drivers, it might be a good idea to switch to a policy with a higher deductible, such as $500 or $1,000, in exchange for a lower monthly premium.
Ask about other discounts. To get the maximum discount from your insurance provider, ask about other programs it offers. Some companies offer a discount for switching to paperless billing, for combining multiple policies and being accident-free for a certain amount of time.

Learn More About Teen Auto Insurance

More Ways to Reduce Insurance Costs

Let’s say you’re confident your teen is a safe driver, and so you’re wondering how to avoid high auto insurance rates for teens who aren’t reckless. In this situation, many insurance companies offer programs that harness the power of technology to get discounts based on driving habits. Using what’s known as “telematics,” insurance companies can plug a small, electronic piece of equipment into your car that tracks things like speed, sudden stops, miles driven, time of day for your trips, etc.

As it tracks information about your driving, the device sends real-time information to your insurance company. If your insurance company has this incentive in place, over the course of several weeks, it will have a process in place to automatically begin giving you a percentage off your bill as a result of your good driving habits.

While telematic technology can be an excellent way to save on teen auto insurance, the savings percentage does usually have a limit with these programs. The limit differs for each insurance company, but reaching out to yours will give you an idea of what’s available to you and how to get started.

In addition to having technology track your teen’s driving habits, it can also help offer discounts for driving low mileage. If your teenager isn’t going to be driving frequently — either as a result of not having his or her own car, or another factor — make sure you let your insurance company know. There may be discounts available for driving less frequently, but there also may be an option to “pay as you drive.” Insurance companies are beginning to offer these pay-per-mile options on a more frequent basis. If you opt to have telematics installed on the car, you may be able to get two discounts, assuming your teenager’s driving habits are safe and his or her mileage is low.

The assumption is almost always to add your teenager to your existing policy, regardless of how costly it may be. If the cost is burdensome, consider asking your insurance company how it would compare to the cost of getting your teenager his or her separate policy. Full disclosure — usually this option isn’t any less expensive. However, depending on the type of plan, vehicles on the plan, other drivers on your plan and the driving records of each family member, it’s worth exploring — if nothing else, you can rule it out.

There are two situations where considering an additional policy may be especially relevant. The first is if you have a plan that requires all insured drivers to be able to drive all the cars you own. In this case, if you do have that brand-new BMW or another luxury sports car, a separate policy will likely be more affordable. Obviously, insuring your teenager to drive your luxury sports car would likely make the cost sky-high.

The second situation when a separate policy might make sense is if your teenager has a job and is eager to be independent and take on the responsibility of having an auto insurance policy free of Mom and Dad.

Another discount that can help you save on car insurance overall is bundling your auto and home insurance together. While this perk isn’t specific to teenage drivers, it can significantly help in offsetting the costs if you have a teenager on your auto insurance plan. It’s also not restricted to home and auto insurance — you can add other policies you may have in place, such as for boats and motorcycles.

Make A List Of Professional Affiliations

When you’re preparing to add a teenager to your auto insurance policy, it’s a great time to consider any professional affiliations that may help you save a percentage on your insurance policy. If you’ve recently switched employers, perhaps they have an employee benefit that offers you a certain percentage off with a particular insurance company. Educators may be eligible for discounts, depending on the insurance company.

If you or someone else in your family has gotten involved with any professional organizations, do your homework on their websites to see if they have any membership benefits that include auto insurance discounts. Many insurance companies offer discounts for veterans or active-duty military personnel, so if you or someone else on your insurance policy has served in the military, be sure to ask about that discount, too.

In addition to reviewing your list of professional affiliations, consider switching from monthly billing to semi-annual or annual auto payment, if your budget allows. While paying once or twice per year may seem overwhelming at first — as it is a significantly larger payment — it’s almost always worth rearranging your budget to make it work. Talk to your insurance company about what discounts they offer for switching to a different payment frequency and enrolling in auto pay.

You could also consider raising your deductible, which makes an impact on lowering your insurance premium. It’s important to remember teenagers do come with a higher risk of accident, so before you raise your deductible, make sure it’s an amount you’re comfortable with if you need to use it. Agreeing to a higher deductible is one way to cut your premium insurance costs, but it won’t work for everyone.

Making sure you have the coverage you need is the priority, and it’s especially important when you’re adding a teen driver, who comes with greater risks. While this tip isn’t specific to adding a teenager to your auto insurance policy, it can certainly help you offset the costs.

Learn More About Car Insurance

Life’s expensive, whether you’re a teenager or an adult. Learning the basics of money from a young age, including how to set and achieve financial goals, and how to cut costs and get the most value for your money, will pay off in the long run. The same is true of learning as much as you can about car insurance. Getting a sense of how the system works as a teen will help choose the right policy, bo

Rising Average Costs For Teen Drivers

When a married couple adds a teenage driver, their average costs go up 79 percent. If you have a teenage son, that number is 92 percent, while a teenage daughter lessens the blow with a 67 percent increase.

Get a free quote for your insurance with an additional teen on your auto insurance, or learn more from our Guide to Auto Insurance.

Location matters, too. If you live in New Hampshire, Rhode Island, Maine, Wyoming, Connecticut, Illinois, Oregon, Minnesota, West Virginia or Ohio, you’re in one of the most expensive states for premium increases due to teenage drivers. If on the other hand, you live in Hawaii, New York, Michigan, Montana, New Mexico, North Carolina, South Dakota, Mississippi, Nevada or Wisconsin, you’re fortunate to live in one of the states with the lowest increase for teenage drivers.

While it’s easy to get discouraged about the financial burden of extra insurance expenses, one of the biggest mistakes to avoid with teen auto insurance is to assume there’s nothing you can do to minimize the impact on your wallet. The reality is that there are some incentive programs in place that can help reduce the financial burden through insurance discounts.

The Costs Of Being A Teenager

As a teen, what are you spending your money on? While exact costs vary from teen to teen, it’s likely you’re buying food, spending money on time out with your friends and paying for the privilege of driving around town. You might also be socking money aside for college. If you’re a style-conscious teen, clothing, accessories and makeup might be considerable expenses, too.

Let’s break things down and see where most teens’ money goes.

Teenagers tend to eat a lot. If you’re a teen right now, you probably didn’t need us to tell you that.

One survey of 2,000 parents of teenagers (between age 13 and 19) revealed that the average family spends more than $50,000 feeding those teens during those seven years. The average teenager eats more than $140 worth of food per week at home. During the summer, when school’s out, the typical teen snacks 50 percent more than usual.

That covers food spending on the part of many teenagers’ parents. Teens themselves are also spending a significant chunk of change on food. Teenage boys dedicated most of their spending to food while food spending came in second place among teenage girls.

Where are teens spending money on food? At national fast-food chains, with Chick-fil-a, Starbucks and Chipotle topping the list of places to eat.

Spending on social activities and entertainment can vary from teenager to teenager, depending on your overall interests. One notable teenage rite-of-passage that has seen inflation in recent years is prom.

The cost of prom can range from manageable to outrageous. Your outfit, whether it’s a tux or dress, is likely to cost more than $100. Tickets to the dance itself can be in the neighborhood of $100. Then there are the extras, such as renting a limo with your friends, paying to have your hair and makeup done, and accessorizing your outfit with a bag, jewelry and other details. Some teens also put together elaborate “promposals,” which can cost around $300.

All told, the cost of going to prom is just under $1,000 for girls and just under $900 for guys. Some schools have proms for juniors and seniors, meaning if you decide to go during both years, you can end up paying a pretty penny twice.

Prom might be the big social event for some teens, but it’s likely not going to be the only expense related to having a social life during your teen years. Some other common entertainment-related expenses include:

Video games
Concerts and movie tickets
Music streaming services
Books

When you got your license, your parents might have been kind enough to buy you a car. That’s a sweet deal, but then they dropped this bomb — you’re responsible for paying for gasoline, car insurance and maintenance. If you get in any trouble on the road, such as a speeding ticket or a parking ticket, you’re on the hook for paying for it, too.

So how much is driving going to cost you? It all depends on where you live, the type of car you have and how seriously you take road safety. Some of the costs associated with owning and driving a car include:

Fuel: In March 2019, gasoline cost an average of $2.479 per gallon across the US. Gas prices vary considerably based on where you are in the U.S. The Midwest has significantly lower fuel prices compared to the west coast, for instance.
Maintenance: Routine car maintenance includes changing the oil, rotating the tires and an overall inspection. The cost of maintaining a vehicle varies considerably. If you are a DIY-er, you can expect to pay less for an oil change than someone who brings their car to the shop. The type of oil, tires and other parts your car needs also influences the cost of maintenance.
Insurance: From an insurance perspective, teens are among the riskiest drivers to insure. They’re new to driving and are just starting to figure out the rules of the road. For that reason, insurance companies typically charge a higher rate to insure teen drivers. The good news is most insurance companies also offer multiple discounts to families with teen drivers or to teenage drivers themselves, which help to reduce the overall cost.
Tickets: In the state of Missouri, a speeding ticket can cost anywhere from $85 to $474, depending on how fast you were going and where you were driving. Unlike fuel, maintenance and insurance, the cost of tickets is an entirely avoidable expense as a young driver. Make sure to follow the rules of the road and to obey posted speed limits, and you’ll easily avoid getting pulled over. If you get a ticket make sure to get it fixed, you will pay less money in the long run.

Although the cost of tuition for a public high school is free, there are often costs associated with going to school. School costs can include paying for extracurricular activities, such uniforms for sports teams or marching band, participation in the school play or membership in clubs and honor societies. There’s also the cost of field trips as well as spirit days and fundraisers.

If you’re planning on going to college, you can expect to pay fees to take entrance exams. As of 2018, the SAT cost $47.50, and the SAT with essay cost $64.50. Some students might be eligible for a fee waiver, based on your family’s income and household size. If you’re interested in having the fee waived, you can ask your school’s guidance counselor for more details.

College-bound students often take advanced placement (AP) tests to see if they can earn college credits for courses they took in high school. If you’re in AP courses and want to take the exam, the cost is $94 per subject test as of 2018.

While the $94 price tag can seem steep, it is often much less than the price of a college course. Depending on how well you do on the test and how many exams you take, you might earn credit for multiple classes, helping to reduce your overall college costs.

From clothing and makeup to footwear and accessories, teens tend to put a significant portion of their spending money towards fashion and style-related purchases. The Piper Jaffray survey found that many teenagers are particularly brand conscious, which can increase the price of fashion and style. Companies such as Nike, Michael Kors, tarte, Kate Spade and Vans were among the most popular among teenagers.

Fashion-conscious and financially-savvy teens have found that one way to put together stylish, unique looks without spending a lot of cash is to visit thrift stores. You’re likely to find one-of-a-kind outfits at thrift stores, usually for much less than you would pay to put together a similar look with new clothes.

Today’s teens are the first fully digital generation and don’t remember a world before the Internet or cell phones. Many teens are online daily, using apps like Snapchat, YouTube and Instagram. They are also likely to have their own smartphone and use a laptop or computer for schoolwork and fun. About 45 percent of teens say they are online pretty much constantly.

Technology costs for teens include the price of the devices themselves, as well as the price of a phone plan. While some school districts will give students laptops for free, you might have to buy your own. One way to save money on a laptop or smartphone is to look for a refurbished device. It will work as a well as a brand new product but is likely to have a considerably lower price tag.

Put more money in your pocket now.

When you’re setting money aside for a big goal, it helps to trim your costs everywhere else. From going out with friends to outfitting yourself in the coolest looks, there’s always a way to save money.

Lower Your Car Insurance Rates