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7 ways to cut teen insurance bills

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CarInsurance.com

Teenager learning to driveExpect to pay a hefty sum to insure your teen driver.

Adding a teen driver to your car insurance policy can boost rates by 20 percent to almost 200 percent, depending on variables that include the state in which you live, the car the teen drives, his or her student status and, of course, your insurer's rules.

So should you just buy your teen driver a bus pass and let it go?

"The downside to not letting your teen drive at all is that they may rebel against you and also endure teasing from friends," says David Bakke of personal finance advisers Money Crashers, based in Atlanta.

Your tolerance for heavy sighs may help determine what you and your teen do next.

Stalling tactics

Wait. Any brand-new driver – even if he or she is 40 -- will pay more for car insurance, usually for the first three years of licensure. But a teenager also pays for being young, and the price is steep. A 16-year-old may face a surcharge as much as 100 percent. That youth surcharge goes down a bit every year, so a driver newly licensed at 18 will pay less than at 16. (See "What young drivers need to know.")

Hang on to the permit. "Instead of preventing (teens) from driving, consider having them keep their drivers' permits for a longer period of time,” Bakke suggests.  Some car insurance companies don’t include the teenager in rate calculations until the new driver is fully licensed. Others do – so ask.

If your teen drives the car alone and wrecks it, you probably will be covered – and then charged premiums as if the teenager were licensed now that the child is driving alone, says CarInsurance.com consumer analyst  Penny Gusner.

It’s not like they can’t use the practice with you or another adult, licensed driver in the car. Per mile driven, teen drivers ages 16 to 19 are three times more likely than drivers age 20 and older to be in a fatal crash, according to the Centers for Disease Control and Prevention.

License the teen, but don’t let him or her drive your car. It’s called a named driver exclusion, and it means the insurance company won’t consider the teen when it calculates your rates. But you are agreeing that the child won’t drive your car – and the insurance company will not pay for the damages if he or she wrecks it.

“Not every company may allow the practice,” says Gusner. “And those that do may want to charge you a fee or surcharge for doing so.”

If you decide to go for the license

Snag that 'good student' discount. Depending on the company and your state, a good student discount can save you as much as 20 percent, says Dan Young, spokesperson for auto-body repair experts CARSTAR and a 20-year veteran of Allstate Insurance.

In most states, a good student discount is among the biggest money-savers you’ll find, decreasing a typical full-coverage bill by an average of 12 percent, according to data gathered for CarInsurance.com by Quadrant Information Services.  In some states, such as Illinois and Minnesota, the average good student discount was nearly 18 percent.

Virtually every carrier offers a good student discount; the usual qualifiers may include full-time enrollment in high school or college, average grades of at least a "B," Dean's List status, or a ranking in the top 20 percent of his or her/class.  Often the discounts carry over even after the student has left school, up to a certain age.

Consider a driver safety course. Taking and passing these courses, routinely offered at area high schools, state motor vehicle departments, and elsewhere, generally qualify the teen for additional insurance discounts. The discounts cut a typical full-coverage bill by about 2.4 percent, according to the Quadrant data, but the discount was twice that amount in many states and not available at all in others.

Stay accident-free and ticket-free. You don’t want to be on the wrong side of an accident claim with a teenager on the policy. Insurance companies also can levy surcharges after accidents or major traffic violations. With a teenager on the policy, that surcharge gets multiplied again.

Let’s say your $100-a-month liability car insurance bill doubled when you added your teenager to the policy.  Then you have an accident, triggering a claims surcharge of 25 percent.

On a policy by yourself, your bill would rise to $125. With the teen, it goes to $250.

To really keep your rates low, do all you can to prevent your teen from becoming involved in an accident. The National Association of Insurance Commissioners (NAIC) released a report showing that teens whose parents set rules and were engaged with their teen drivers were 50 percent less likely to become involved in a crash.

"As parents, the ultimate goal when our kids start driving is to ensure their safety and the safety of others. That starts with establishing expectations," says Jim Donelon, president of the NAIC and Louisiana insurance commissioner. "The good news is that by setting boundaries, we are making the roads safer for everyone."

Review your policy. If your teen leaves for college and won't drive your car, you may want to see if your insurer will temporarily remove him or her from your policy.

But, cautions Jim Sutton, president of James F. Sutton Agency in East Islip, N.Y., "you need to be sure the car is definitely home and not away with the student. After a period of at least six months, the young driver can elect to purchase his or her own policy with your policy or go out and get his or her own coverage without having the 'inexperienced operator' surcharge applied." Of course, the length of time varies depending on the insurer.

Lastly, no two insurance companies calculate your rates the same way. If there were ever a time to compare car insurance rates, now is it.

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