Your 16-year-old can't wait to get behind the wheel. But here's an unfortunate truth: Once you add your teen driver to your auto insurance policy you'll suffer a big financial hit.
How big? Last summer, insuranceQuotes commissioned a study by Quadrant Information Services that found that parents on average saw their auto insurance premiums jump 80 percent once they added their teen drivers to their policies. In some states, that hit is even worse: In New Hampshire, for instance, auto insurance premiums soared by 114.92 percent after parents added their teen drivers.
If you were paying $1,200 each year for your auto insurance each year before adding your 16-year-old son, you can expect to pay more than $2,100 annually after doing so.
You can't avoid a premium increase after adding teen drivers. But there is some good news: Parents can take steps to lessen the financial pain of insuring their young drivers.
Auto insurers offer a variety of discounts for which parents adding teen drivers might qualify.
Look for discounts for teen drivers to reduce car insurance costs
Jordan Perch, auto insurance expert with DMV.com, a site devoted to news about motor vehicles, says the good student discount is one of the most common ways for parents to ease the financial hit that comes with teen drivers. Most insurance companies offer discounts for teens that have grade point averages of 3.0 or higher. The discounts are usually in the range of 20 percent.
"Make sure your kid gets good grades," Perch says.
Parents can also reduce their premium increases by making sure that their teens drive older cars.
"Used cars always have lower insurance premiums than new vehicles," Perch says.
See also: Raise your car deductible and save big
Those parents who do buy their teens new vehicles can lower their premium hit by making sure that the new car is equipped with the latest safety and security features. These measures help lower auto premiums, Perch says.
Safe-driving courses can help, too. Chris Long, CEO of LongevityBrokers.com in Denver, says that teens who complete driver's education programs are considered safer bets by insurance companies, which will reduce the premiums that parents take on. Several insurance companies offer their own safe-driving courses. If you're insuring a teen, ask about them.
Long points to State Farm, which offers the Steer Clear safe-driving course. This course will reduce the premiums for teens on a State Farm policy by 15 percent, he says.
Perch agreed that parents are making a smart financial decision by enrolling their teens in safe-driving courses.
"Going through a driver's ed program gives teenagers a chance to improve their driving skills and learn the rules of the road a bit better," Perch says. "That helps reduce their risk of getting into an accident, resulting in lower insurance rates."
Tap technology to reduce insurance hit
There's a higher-tech way, too, for parents to reduce the cost of teen drivers: telematics.
Nino Tarantino, CEO of Octo Telematics North America in Newton, Mass., says that telematics-based insurance programs rewards drivers who operate their cars safely, including teens. Under such programs, you'll install a device in your cars that charts how many miles users drive, how fast they drive and how often they brake.
If the data show that teens are driving safely, they might become eligible for a discount, Tarantino says.
"These programs allow insurers to price policies based on an individual's driving behavior instead of the average of all drivers that may or may not be as good of a driver as your teen," Tarantino adds. "Given that teens are new drivers, a program can work in favor of a responsible teen who drives with care."
Tarantino says that parents should ask if their insurers have a telematics-based UBI -- usage-based insurance -- program. And if they don't? Tarantino recommends that parents request that they start one.
And if all these discounts aren’t enough? There's one more way for parents to save: They can hold off as long as possible to get their teens their driver’s licenses.