Question: Do car insurance companies handle things differently with teen drivers than adult drivers?
Answer: Yes. Obtaining an auto policy for a teen driver can be a bit more complicated for teen drivers than adult drivers. However, once the car insurance policy is in place, the coverage and the claims process is the same for both teen and adult drivers.
Buying a policy as a teen
Car insurance companies aren’t fond of selling car insurance policies to teenagers. The main reason is because a contract – like an auto policy -- signed by an individual under the age of 18 can be found invalid if the minor chooses to void it.
Due to this contract issue with minors, not all car insurance companies will do business with teen drivers. Minors who want to buy their own car insurance policies have to compare insurance companies to find the insurers who offer policies to minors.
Once an insurer is found that will sell a policy to a teen, it’s likely that the car insurance provider will require the teen driver to have a parent or guardian sign on the policy as well. This will make the contract binding since the adult that signs can be held liable for the minor’s actions if the teen fails to fulfill his or her obligations with the car insurance company.
To avoid these complications, if you’re a minor and live at home with your parents I’d suggest you see about being added to your parent’s car insurance policy. If you want or have a car of your own, then to you may need to have at least one parent’s name on your car’s title along with you for the car to be eligible to be insured on their policy
In general, being on a parent’s policy is much easier and affordable than getting a policy of your own.
Cost of teen policy
Another way in which car insurance companies find teen drivers different than adults is the category in which it places these young drivers. Teenagers are considered high-risk drivers.
Teen drivers are young, immature and inexperienced. According to data from Insurance Institute for Highway Safety (IIHS) the fatal crash rate, per miles driven, for teen drivers ages 16 to 19 is nearly three times the rate for drivers age 20 and over.
Insurance companies see data like this, and its own accident data regarding young drivers, and find that this class of drivers is risky to insure since claims are likely to be paid out.
A rule of thumb with insurance companies is that the more of a risk you pose as a driver, the more you will pay for your car insurance premium.
So teen drivers are looked at as quite the risk for insurance companies, while adult drivers who have had years of driving experience and have proved themselves as decent drivers are not. This is why some car insurance policies have an exclusion against covering anyone under a certain age (such as 25).
What teens can do
What can change the way a car insurance company handles you is have time pass. By the time a young driver hits 25 years of age, his or her car insurance rates should start to come down, and they will be treated as other adults.
Until that time, there are discounts for teenagers. This includes:
- Wait to get your own policy. As touched on earlier, your parents’ longer driving history and hopefully good driving records can help counter the risk of a new teen driver being added to the policy -- and keep the rates from being too sky high.
- Do well in school. Getting good grades will not only make your parents happy but can get you a good student discount, usually between 5 to 15 percent, with your car insurance provider.
- Take driver’s education. Some car insurance companies offer a discount of around 5 percent to teens that take a driver training course that has class room and behind-the-wheel instruction.
- Drive a car that will get you discounts. The car you’re insured on as the primary driver matters to the insurer. For this reason getting an expensive, high-powered vehicle as a teen will cost you a fortune to insure. Instead, a reasonable sedan with safety features and anti-theft devices should get you discounts that will help lower your rates.
- Have your driving monitored. If sign up for a pay-as-you-drive (PAYD) plan with a car insurance company, it will use a telematics device to monitor your driving behavior. If the insurer likes what it sees, you can be eligible for a sizable discount.
- Keep a clean driving record. Your history as a driver is one of the most important rating factors to car insurance companies. If you can show that you’re a responsible driver and keep your record free of violations, accidents and claims in a three to five years you could be eligible for a good driver discount of 20 percent or more.