Short answer: You must have a teen on your car insurance policy after they become licensed and drive your car – in some states after they get their learner’s permit. Doing this is an optional step, and a claim following an accident may be denied if you don’t do it.
That’s the brief (and brief and brief and brief) version. Now, all that’s really necessary to learn before your teen drives.
Permit or License? The timing is indeed important
Many parents believe that they don’t need to take any action until their teen has passed the road test. This is not necessarily the case.
Most insurers don’t give any premium premiums for a permit holder. Many will permit you to add them without charge at the time of the permit issuance and you’ll continue to pay no coverage until the teen is fully licensed.
Some states take this one step farther. Not only do licensed drivers have to be added on to California, Maryland, Indiana, and Illinois, but permit holders are too. When in doubt, give your insurance company a quick call and it will be quickly decided.
When your teen gets a full driver’s license, the rules become more stringent. Most carriers want them on your policy, and if they reside in your home and have easy access to a vehicle, then there’s no reason they can’t be added to your policy.
The truth about the cost of college.
The shock comes in when you start adding up the figures. The additional cost of a 16-year-old to a family policy is the range of $2,000 to $3,500 annually, depending on your state, insurance company and what sort of vehicle you’re looking at. For some homes, premium increases can be as much as 50-100% of their current premium.
Why so steep? The age group of 16 year olds has the highest crash rates on the road of any age group. They’re priced directly into the cost of your insurance, and it doesn’t get any easier until your teen is closer to 19 or 20.
The bad news: it will typically be more expensive than adding your teen to your current policy.The good news: typically it will be cheaper to add your teen to your existing policy than to buy a new policy for them. A separate policy does not benefit of multi-car discounts and household bundling, and insurers don’t see a stand-alone teen policy as the same level of risk as a multi-car policy.
The true drivers of the price
There are a few things that can help determine where you fall in that $2,000–$3,500 range.
- Gender. On a statistical basis, male teen drivers are more expensive to insure than female teen drivers, and are statistically more likely to be involved in an accident.
- Vehicle. Insuring an older 4-door auto with exemplary safety performance is quite a bit less expensive than a sports car or newer performance car.
- Grades. A good student discount (usually based on a B standing or above) will give a significant reduction to the rise.
- Driver’s ed. Any driver’s education course that’s approved by the state can get you a discount from most major carriers.
- Telematics programs. For teens who are the most cautious drivers, usage-based insurance apps that monitor driving can reduce costs, but for the riskiest drivers, this tracking can increase costs.
- ZIP code. Prior to the arrival of your teen, local accident and theft rates play a role in your base price.
How to “soften the blow” when the increase comes.
You don’t have to take the first estimate that your insurance provider gives you.
Specifically inquire about all teen discounts, the big three are good student, driver’s ed and telematics. Do not take it for granted that your agent will be able to make all those suggestions automatically.
One lever is to increase deductible. This won’t completely cover the additional expense for a teen, but it will help. We delve into that compromise in our car insurance deductible guide.
Shopping around is important, as well. While it’s true that some insurance companies are more competitive than others, you need to get quotes from at least three of them before the end of your teen’s driving period, because you’re not sure if your present insurance company is competitive.
It’s important to get a good grasp of insurers’ overall pricing structure as well. We’ve written another article about how car insurance rates are calculated that details other factors besides age that contribute to your final rate.
Comparing Your Options
| Option | Typical Cost Impact | Best For |
|---|---|---|
| Add teen to family policy | Moderate increase, but cheapest overall | Most households |
| Separate teen policy | Highest total cost | Rare cases, like insuring an expensive car separately |
| Excluded driver status | No premium increase | Teens who genuinely won’t drive the household car |
This is an explanation of what “Excluded Driver” is all about.
There are some states where you are able to exclude a licensed household member from a policy, rather than include them. It completely eliminates the premium increase.
It’s also as its name implies: that person is not covered under your policy, for anything, such as backing out of the driveway once. You may find yourself in a situation where your teen has moved a vehicle in an emergency and you may be liable for the claims you’ve denied.
If you’re 100 percent sure that your teen won’t touch a vehicle in your home, then exclude them.
There are many different types of State Rules.
That’s a common mistake many parents make so here’s a quick reference on how the timing requirements may vary.
| State Example | Permit Holder Rule |
|---|---|
| California | Must be added immediately, even with a learner’s permit |
| Maryland | Coverage required even for permit holders |
| Indiana | Coverage required even for permit holders |
| Illinois | Coverage required even for permit holders |
| Most other states | Typically required within 30 to 60 days of full licensing |
This is not a comprehensive list and each insurance company in the state may have their own individual policy on their permit holders. Direct communication with carrier takes 5 minutes and it eliminates any guesswork.
Adding your teen is quite simple.
- When your teen gets his permit or license, contact your insurance provider or log in to your insurance information portal.
- Enter their license number, birth date and main vehicle they will be driving.
- Even though some driver’s ed, good-student, and telematics discounts are not always offered, be sure to inquire about them.
- Check revised premium and the effective date of the coverage.
- Ask your teen to get the policy signed and put in writing to confirm that it is actually on your teen’s policy.
This usually takes between 24 and 48 hours to be processed and most insurers will provide temporary cover the same day that you make a request.
How did things turn out if you didn’t do this step?
This aspect is the one which parents underestimate. You are essentially allowing an unlisted driver to drive your car if your teen has his license, lives with you and isn’t on your policy.
Should they get into an accident, the insurance agency will be able to find out how a family driver didn’t have to be named. That’s when you’re most in need of coverage, and can result in a diminished payout, claim rejection, or even cancelation of your policy. It’s also important to learn how the minimum coverage is determined per state so that there’s not only a risk of legal consequences for driving without coverage, but there’s a risk of legal consequences for driving without coverage, either.
Remember, have a safety conversation!
While money is important, so is being practical as well. After defensive driving training, teenagers are less likely to have car accidents and in many states, they also have lower car insurance premiums. If your teen hasn’t driven a car before, it may be worth a look before before he or she takes their first ride: Is defensive driving a way to save money on car insurance?
Consider Umbrella coverage if you too?
Here’s another piece of advice that comes off many agents’ tongues almost as an afterthought, but must be considered. Just because you’ve added a teen driver doesn’t mean you will have to pay more for your premium. It also increases your liability risk as well.
If you’ve been carrying your standard liability limits for years with only experienced adult drivers on the policy, you may be surprised to discover that things are different now.If you’ve always had your standard liability limits and you’re only used to having experienced adults on your policy, you may be shocked to find that things are different now. Once a new driver joins the mix, that changes the numbers in a statistic. If your teen is at fault for causing a serious accident, and the damages are more than your policy limits, your teen may be liable for damages to your savings or assets.
A personal umbrella policy is an additional layer of liability coverage over your auto policy, and is typically not very expensive – often a few hundred dollars per year for a lot of additional coverage. Even if you don’t do it, it’s a good idea to at least ask your agent for a quote when you add your teen.
Here are some of the most often made mistakes to steer clear of:
One of the most common is to wait until after the road test to contact your insurance company. If the State mandates that permit holders be on the list, there is a real risk, not a technicality, that this is not being done.
Another is taking the liberty to assume that “full coverage” is automatically extended to the new teen driver even though it hasn’t been specifically confirmed with the insurer. Do not just take it on faith, be sure to have a written commitment.
Not to mention the cost of the family missing out on a discount year after year. Insurers don’t necessarily take all the discounts for granted. Generally, you will need to request.
Frequently Asked Questions
This will be determined by your state. Others such as California and Maryland demand it in the short-term. Others just need to take action after your teen gets his/her license. Check with your insurance company for certain if your state has one.
Yes, generally. Rates can significantly get better starting around age 19-20, and they will further improve until they stabilize around 25, if you don’t have any problems on the road.
In rare cases, it may be a good idea, such as owning a high-priced or high-performance car that you’re not the one driving it.
Allowing an occasional use by a non-resident of the household might be a part of your policy’s permissive use. The exception does not apply to a teen who is living at home with regular access, and must be listed instead.
Yes. Once the driver is removed from your policy, you can update your policy to exclude them as a driver, and should see your premium drop.
The Bottom Line
It isn’t a choice to have a teen driver on your auto insurance policy just because he or she is licensed and driving your car frequently; it’s a fact that costs go up, but is usually no more significant than the cost of a standalone policy or the loss of a claim. Inquire on all discounts, don’t renew until you have checked other quotes and do not sign the papers before your teen’s first driving test.
