Back to school: Lessons on how to properly insure your teen driver

As the summer begins to wind down, parents of high school students across the country are preparing to send their kids back to school with the right supplies and the right clothes. Every weekday, millions of those students will be hopping in their cars to get to and from high school.

Yet auto insurance for your on-the-go student need not be a big, bad bully.

Yes, insuring a teen driver is expensive. Premiums for teen drivers are so high because auto insurers put teen drivers in a high-risk category. Adding a teen to an auto insurance policy can bump up the parents' insurance premiums by 50 percent to 100 percent, according to the Insurance Information Institute.

However, if you do your homework, you could score a better deal for you and your teen driver.

insuring teen driver

Who's the primary driver?

For the driving-age high school student, the proper auto insurance policy can be as important as making sure the seat belts are buckled. Before your child gets behind the wheel on the first day of classes, first ask this question: Who is the primary driver of the vehicle?

“The answer to this question will greatly impact the premium increase to your insurance,” says Charlie Schein, an insurance independent agent in Connecticut who specializes in insuring young people.

Schein says a teen who only occasionally drives the family car doesn’t necessarily need to have his or her own policy since, generally speaking, the parents' standard auto policy will cover anyone in the household who drives the car infrequently. Schein’s advice: “If you’re looking to save as much as you can, then do not make your teenager the principal operator of a car.”

If, however, your teen is the primary driver, the best -- and most affordable -- option is to insure your child on your existing auto policy. For starters, the policy will be cheaper than an individual policy for the teen. Moreover, adding another vehicle or primary driver to an existing policy means the teen most likely will have higher limits (the maximum amount an insurance provider will pay out following an accident) than he or she would alone.

There are a few downsides to consider. For instance, keep in mind that putting your child on your existing policy means you're responsible for your child’s behind-the-wheel mistakes. In the event of an accident, you and your child could be sued. Furthermore, any moving violations or accidents that are your child's fault will be applied to your premium.

And don’t let your teen driver use the family car -- or even his or her own car -- for pizza delivery, Schein adds. Using a vehicle covered by a personal auto policy for commercial delivery can put a policy at risk for non-payment of a claim over even cancellation.

Cost isn't only consideration

Ron Moore, a senior product consultant at MetLife Auto & Home, warns against shopping for insurance based on cost alone. For instance, it can be attractive to drop some types of coverage -- such as collision -- to ease the pain of adding a young driver to a policy. If, however, your teen gets in an accident, you'll be held financially responsible; without optional collision coverage, for instance, you could be staring at hundreds of dollars in out-of-pocket expenses stemming from an accident.

“That reduced premium may look enticing,” Moore says, “but the results of an auto accident may literally leave you homeless, depending on the liability and severity of the loss.”

Who's liable?

Moore says many parents believe that if they go for low liability limits ($100,000 for injuries or $50,000 for property damage, for example) for their high school students, the household won't be harmed if a teen driver is involved in an accident that seriously injures someone. It’s not uncommon for parents to be held responsible for damage and injuries caused by a high school student, even if the student has his or her own auto insurance policy.

“It has happened where the parent's wages are part of a structured settlement or are garnished to pay for the accident damages,” Moore says. “Parents shouldn't believe that they won’t be held responsible for the actions of their son or daughter, even if they have their own insurance policy.”

As far as responsibility goes, remind your teen that his or her grades could translate into cost savings. Discounts are available for young drivers, including price breaks for maintaining a B average in school. At Nationwide, the good-student discount is up to 15 percent; at Allstate, it's up to 20 percent. Some companies also provide savings for students who pledge to drive safely or who participate in driver training courses.

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