Tip of the Week: Teen Drivers and Insurance (4/26/99)

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	Teen Drivers and Insurance Financial Tip of the Week by Deloitte & Touche OnLine April 26, 1999

Sixteen isn't so sweet for premium payers.

See our archive of previous tips on your money, your taxes and your financial plan.

If for every action there is an equal and opposite reaction, then for every enthusiastic, newly licensed 16 year old there is an equally distraught parent anticipating skyrocketing insurance premiums.

Although increases vary widely, parents can expect them to roughly double when their children take the wheel, but there are ways to curtail that increase, according to Jayna Neagle, a spokeswoman for the Insurance Information Institute in New York.

"First of all its less expensive if a teenager is ensured on your policy rather than if they have their own," she said. "That's because you have a track record with them and your child doesn't. Also, since they're on your policy the company expects that you would logically stress the importance of good driving habits."

Other ways to contain costs include:

Listing your teen as an occasional driver. Many policies will charge a lower premium if a teen is an occasional, rather than the primary, driver of a vehicle. Parents can save even more if their child is the occasional driver of the family clunker, said Dan Kummer of the National Association of Independent Insurers. Older vehicles with less horsepower are cheaper to repair if there is an accident, he said, and tend to discourage a Mario Andretti wannabes.
Encouraging your teen to hit the books. Most insurance companies will reward the parents of high academic achievers a "good students discount". The benchmark of a good student - honor roll, dean's list, grade point average - differs from insurer to insurer.
Enrolling them in driver's education. Whether these courses are more likely to reduce Junior's risk of having an accident than if Mom or Dad had taught him how to drive is debatable. Still, insurers tend to reward driver's ed and defensive driving school graduates with discounts.
Asking about additional discounts. Increasing your deductible, grouping your home and auto insurance with one carrier and other measures can decrease premiums.

Finally, although some parents may be tempted to forget to notify their insurer about Junior's 16th birthday -- a survey by the Insurance Research Council found 20 percent of respondents believe it is OK to list an older adult as the driver of a car actually driven by someone under age 21 -- experts frown on such omissions.

Both Neagle and Kummer said most insurance companies would most likely honor a policy even if a teenager member of the household they didn't know about was driving. However, they pointed out, companies may find out about young drivers through their own records or through police reports filed if the teen has an accident or is cited for a violation. In that case, parents should be prepared to pony up, they said.