Many parents wonder, “Do you have to add your teen to your auto insurance policy?” Most parents do not look forward to the day their children start driving. Not only is it a reminder your child is growing up & will soon be an adult, and a safety concern for parents, but it often means sky high auto insurance rates. Major auto insurance companies offer discounts for taking their teen driver education programs, like State Farm’s Steer Clear program, or the teenSMART driver safety program used by Allstate, AAA, and other companies. But car insurance rates with a young driver in your household — even when they qualify for discounts — can still bust your budget. Here is what you need to know about your child and car insurance, to get the best rates for you, and your child when they start driving.

Teen Drivers & Their Parents Auto Insurance Policy

Before your child gets their learner’s permit, call your insurance company and find out if they rate for drivers who only have a permit. Most companies don’t rate for drivers with permits only, but some do.

Ask your insurance company how much they will charge you once your child has a permit or a license. Ask about discounts for your child. Usually, if your child is a full time student and has a “b” or better average, they can qualify for a good student discount.

Also, sometimes there is a discount for driver’s training, or a driver safety program offered by your insurance company, as referenced above, to qualify for a discount.

Another common discount for your child driver is a discount for being away at a school over 100 miles from home without a car. For example, you live in New York and your child attends the University of Chicago, and lives in the dorms without a car.

If you are considering changing a car, buying another car, or getting rid of a car, have the change taken into account when you get the price for adding your child as a driver to your insurance policy.

If you are adding or replacing a car, make sure you have the vehicle identification number (VIN) for the new car, so you get an accurate quote. I cannot stress the importance of having the VIN enough — inaccurate information can lead to getting a price quote that could be $100s off the actual price if the vehicle is financed, requiring comprehensive and collision coverage, and your child will be driving it.

If you are buying a car for your child to drive, you may need a separate policy if your child is a co-owner, depending on your insurance company. You will definitely need a separate policy in your child’s name if you live in a state that allows a minor child to own a car in the child’s name alone, or if your child is 18 years old or older, and the car will be in the child’s name alone.

Not having any ownership in the car your child owns may eliminate your liability if your child is at fault for an accident — leaving your child to bear the burden of liability. Consult your lawyer if this is a concern for you. If your child is 18 years old, or has a history of reckless behavior, or substance abuse problems, it may be a good way to go.

But if your child has to get their own car insurance, it may be MUCH MORE expensive than you owning the car and adding it to your policy. If you are paying for your child’s insurance either way, you may be able to take higher liability, and purchase a million dollar umbrella liability policy, for less money than buying a separate car insurance policy for your child.

Car insurance rating varies now more than ever among insurance companies, but generally, if you have 2 adult drivers, 2 cars, and you add your child as a 3rd driver, since you have more drivers than cars, your child will get a lower rating as an “occasional” driver.

If you have 3 cars and 3 drivers, your child will get a higher rating as a “principal” driver on one of the cars.

Whether your child is rated “occasional” or “principal,” it is a percentage increase of your basic rates, so sometime an “occasional” driver rating for your child on a new car with comprehensive and collision coverage, will cost more than a “principal” driver rating on an older car with liability only.

For example, if you have 2 new, high-end luxury vehicles, it may be less expensive to get an old car with liability only as a 3rd car for your child to drive, than to add your child as a rated driver to your auto insurance with only the 2 new luxury cars.

Rates for young drivers, methods of rating, discounts, and rules for discounts differ a lot among car insurance companies. You need to shop for the insurance company with the best rates for your new situation of having a teen driver.

Shop with other insurance companies for the best combination of customer service and rates. My website can help you do it, so use the link at the end of this blog post.

If you find a better insurance company, have the new company confirm the rates, and switch over to the new company once your child is licensed. Wait for the new policy to be issued to make sure there are no mistakes, and do not cancel your old policy or add your child to it until you are satisfied with the new policy.

Do you have to let your insurance company know when you have a new driver living with you? Yes, you do. A lot of parents won’t let their child drive their car, and don’t see why they need to pay higher rates.

Most car insurance policies cover all family members living with you as drivers (check with your agent/insurance company to find out what drivers are covered under your auto insurance policy), so you don’t pay more to buy coverage for your child driver, but the insurance company charges you more based on who is licensed and living with you. If an insurance company finds out there is a licensed driver living with you not rated on your policy, they will rate for the driver and do not need your permission to do it.

Although you are required to let your insurance company know about new drivers in your household, I have never seen coverage declined because of a customer failing to do it.

For example, say your daughter lives with you, she has been licensed for 2 years, but she’s not rated as a driver on your auto insurance, and she just had an accident with your car. Your daughter is covered as an insured driver for the accident. Your insurance company will add her to the policy, but they will not charge you for the 2 years she was licensed, but not rated.

However, you do not want to complicate a claim. Your insurance company will be skeptical and possibly more difficult with you if you withhold important information from them to get lower rates. Be honest and add all drivers in your household to your insurance as your insurance company requires.

Also, say your daughter was never added to your policy. She has just graduated college at the age of 21. She is buying a new car for her new job, but because she has no insurance history, she has to pay extremely high rates. She may have a clean driving record, but she may not be able to get reasonable rates until she has 3 years of continuous insurance history. Adding your daughter when she is licensed, and establishing an insurance history for her, can help her rates in the long run.

I recommend if your child needs a car, go with an older car that needs only liability coverage to keep your rates reasonable. As your child looks at the cars they want to own, make sure your child knows the cost of insurance — particularly for the new and sporty cars. I have seen many young people stretch their finances to afford the car payment for their dream car, only to find out the cost of the insurance is more than the car payment. Don’t let the cost of the car insurance be a surprise.

My personal experience has taught me parents who have their children share in the cost of insurance, and the purchase of the child’s car, are more likely to drive safely and have less claims, and value their car.

How many kids did you know growing up who wrecked their brand new car their parents bought them the day they were licensed, shorty after they received the car? I know a few, and saw it happen with some of my customers over the years.

Young and inexperienced drivers are a leading cause of expensive claims for insurance companies. Insurance companies are interested in making your child a safer driver, and some companies have innovative new programs to help your child avoid accidents and dangerous driving.

As you shop your insurance, ask what programs each company may have available to help your child develop good driving skills. The insurance company wants to avoid claims, but you should want to protect your child. Take advantage of what the insurance company has to help you and your loved ones.

Remember to shop your car insurance anytime your situation changes. You really can save $100s by being a smart auto insurance shopper.

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