Insurance

7 tips to reduce teen driver insurance rates

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It’s a day both exciting and terrifying when your teen is old enough to take the wheel. On the plus side, their newfound independence means you have more time for yourself. Once they have that driver’s license in hand, you can take a step back from car rides to meet friends and attend after-school activities. Having a teen driver in the house can also be helpful if you live in a school district affected by the nationwide bus driver shortages.

The downside — beyond the inevitable increase in your anxiety — is that insuring a teenager to drive may put a strain on your budget. According to The Zebra’s 2021 State of Auto Insurance report, the national average for auto insurance policy premiums for 16- to 19-year-olds is $4,573. Broken down into monthly payments that could add over $380 to your expenses.

The good news is that age 16 is really the most expensive year, so you can expect that policy to steadily drop each successive year. Here’s a look at annual auto insurance premiums by age, according to research by The Zebra.1

16 years old$5,744
17 years old$4,876
18 years old$4,271
19 years old$3,082

A big drop occurs at the 20-year-old milestone birthday when the average premium falls to $2,780. While you’re waiting out those pricey teen years though, continue to live in the moment and lower your teen’s premium utilizing these seven tips.

#1: Bundle multiple insurance policies

Potential average savings: $460

Using the same carrier for all of your insurance policies really can make a difference in savings. Data from The State of Insurance reveals that bundling auto insurance with either renters, homeowners or condo insurance saves on average 8%. The average 16-year-old’s auto insurance policy costs $5,744. Using those average savings, you could potentially reduce your bill by $460 a year. 

Homeowners tend to experience a slightly larger savings of 10%. That could potentially reduce the average 16-year-old’s premium by an additional $115. The average renter bundling auto insurance with a renter’s insurance policy only saves an average of 5.3% — likely because a renter’s insurance policy is less expensive than homeowners insurance.

#2: Change your teen’s coverage during college

Potential average savings: $640 to $1,280

It’s possible to reduce your auto insurance coverage if your teen goes to college out of town and doesn’t drive a car there. In this situation, you may be able to remove your teenager from the policy, then add them back on as a temporary driver during school breaks. 

Alternatively, your insurance company may offer a “student away from home” discount. Requirements may vary by insurer, but usually they must attend a school that is at least 100 miles away. This could result in savings anywhere from 15% to 30%.

The average premium for an 18-year-old driver is $4,271. This discount could save you as much as $1,281 for each year they meet the eligibility requirements.

 

 

#3: Increase your deductible

Potential average savings: $517 to $919

Opting for a higher deductible lowers your annual auto insurance policy. The size of the savings varies by insurer and by where you live. But research shows that increasing a $500 deductible to $1,000 could save you 9%. And if you increase it even higher to $2,000, your savings could average 16%.

Applied to a 16-year-old driver’s rate, your savings could range from $517 to $919. But this decision does require some thought. How safe a driver is your particular teen? Data from 2019 revealed that teen drivers have a crash rate that is four times higher than drivers who are 20 years or older. The lower deductible may be worth the extra cost in case of one or more accidents while your teen is driving.

#4: Buy your teen a clunker

Potential average savings: Varies by age of car

The type of car your teen drives is another contributing factor to the annual premium cost. Older vehicles cost less to cover. The State of Insurance Report shows that the largest year-over-year cost decrease occurs between a seven-year old car and an eight-year old car. While you obviously shouldn’t buy a car solely based on age, it may be worth focusing on older vehicles for your teen to help lower insurance costs. 

#5: Pay your annual premium upfront

Potential average savings: $210

According to The 2021 State of Insurance, paying your annual premium upfront can save 4.9% compared to installment payments made throughout the year. Let’s say your teen is 18 years old and your annual premium is the average $4,271. You could potentially save nearly $210 per year by paying in advance.

#6: Check for student discounts

Potential average savings: $283 

There are two common types of discounts your teen may qualify for on your insurance policy. The first is a good student discount for maintaining a 3.0 GPA or higher. You may need to provide a transcript twice a year in order to continually qualify for the discount. On average, this can amount to $283 in average savings.

Another option is to have your teen pass a safe driving class. Each insurer may have its own requirements and the amount of the discount will vary as well.

#7: Install a telematics device in your teen’s car

Potential average savings: $172

A telematics device can be installed in your teen’s vehicle to track their driving habits. The Zebra discovered that by using one of these devices, customers experience an average 3% savings nationwide. That’s quite sizable when you’re paying as much as $5,000 or more on your teen’s premium each year. Plus, you may see even bigger discounts depending on your state. Connecticut residents, for instance, save over 8% when a telematics device is installed.

Bottom line

Life gets a little more expensive when your teen starts to drive. But you can save a substantial amount of money when you use multiple strategies to lower your family’s annual auto insurance premium. Find the best options for your personal situation and don’t be afraid to shop around and compare quotes from multiple auto insurance companies.

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Methodology



The auto insurance rates published in this guide are based on the results of our comprehensive State of Insurance car insurance pricing analysis. This analysis of more than 83 million insurance rates spanning every U.S. ZIP code, using a sample user profile: a 30-year-old single male driving a Honda Accord.

To generate pricing for particular rating factors, we altered the driving profile based on the common pricing factors utilized by top car insurance companies. These factors include credit score, coverage level, driving record and more.

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