Insurance for My Teenager: Will I Need a Bank Loan?

By Teresa Ambord

No question about it, insuring your teenage driver can cost a bundle, depending on the circumstances. It's a common misconception among parents of new drivers that teens should be put on a separate policy with lower bodily injury limits. The purpose is to save money on the policy and to keep the teen's driving mishaps off the parents' record.

But the fact is, if a minor teen has an accident, an injured party whose damage is not covered by the low limits of the teen's insurance will most likely go after the assets of the parents anyway. If that happens and you don't have a big stash of cash to cover the damages, your house might be in jeopardy.

Inexperienced drivers have a much higher rate of accidents than experienced drivers. Insurance agents can tell you, a very high percentage of teenagers wreck their first car. So don't risk your personal assets by skimping on bodily injury limits.

Plan Ahead If You Want to Save on the Cost

There are better ways to keep the cost of insuring your teenage driver down, especially if you plan well in advance.

Tips:

  • Remind your teen that doing well in school will make his insurance more affordable since there are often discounts available for good students. Most teens are very motivated to gain the freedom that driving allows. If your teen knows that you will only permit him to drive if his insurance is affordable, he may put more effort into studies, which leads to a double benefit: better grades, lower insurance costs.
  • Get quotes from several different insurers. Rates can vary considerably. Often the companies you see advertising on TV as ultra-cheap are actually a great deal higher than the competition.
  • Have your teenager share in the cost of driving, maintaining and insuring the car. If part of their allowance or paycheck goes to cover the cost, they will more likely appreciate the privilege of driving and make an effort to hold spending down.
  • Don't assume that after your teenager has had commercial driver's training, he or she is prepared. Commercial training programs usually require only a few hours behind the wheel before declaring your teenager ready for the open road. The fact that automobile accidents are the number one cause of death among teenagers should tell you, they need more training than they are getting. Spend enough time driving with your teens and talking to them about the potential dangers, that you feel comfortable with their skills and knowledge.

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