Q: My son is about to get his driver’s license, and I know our insurance is going to go through the roof! What can I do to make it less painful?
A: No matter what you do, your premiums are going to jump when your teenager starts driving. But a few strategies can help reduce the hit.
1. Shop around for coverage before your teen gets his license. Some insurers have much better rates for young drivers than others. “If you know your child will be getting his or her license soon, contact your insurance agent to give a heads up,” says Sarah Brown, an independent insurance agent in Shrewsbury, Pennsylvania. You may qualify for a better rate category if you switch before adding your son rather than shopping around after he’s already on the policy.
2. Get credit for good grades. Most insurers offer a discount of as much as 20 percent to 25 percent for students under age 25 who maintain a B average or better in high school or college.
3. Take extra steps to get more breaks. Many insurers offer discounts for drivers under age 21 who completed a drivers’ education course; find out what courses qualify before signing up. Some insurers, such as State Farm, also offer their own safe-driver programs for young drivers.
4. Buy a safe car. Some insurers list relative insurance costs by type of car (see, for example, State Farm’s vehicle insurance ratings). An old beater that may be inexpensive to replace may not have the safety features of a newer car; take a look at the Insurance Institute for Highway Safety’s list of “best choices” for teenage drivers starting at less than $20,000, and “good choices” starting at less than $10,000.
5. Boost deductibles. Collision coverage for teenage drivers is pricey, so this can be a good time to boost deductibles to $500 or $1,000 and keep extra money in your emergency fund to pay for any damages. Compare premiums at different deductible levels to find your insurer’s sweet spot.
6. Benefit from your driving record. If you have the option of keeping an older teenager on your policy or having him get his own policy (the rules vary by state), it usually costs less to keep the teenager on your policy. That way, he’ll benefit from any multicar or multipolicy discounts you receive. You may also want to add an umbrella policy on top of your auto and home insurance liability limits to protect your assets and future earnings if your child causes an accident that injures someone or damages his or her property.
Kimberly Lankford is a contributing editor to Kiplinger’s Personal Finance magazine. Send your questions and comments to email@example.com. And for more on this and similar money topics, visit Kiplinger.com.