Car Insurance can get confusing. Line items such as deductibles, premiums, and comprehensive coverage can leave you in an ocean of mystery. Usually, you don’t figure out what any of it is until you need to use your insurance, only to find something is or isn’t covered by your car insurance.
Another question is if you should or shouldn’t cover your teen driver’s car insurance. Here are a few things to consider when making that decision.
How Far Does Your Money Go?
One of the first things you should consider when looking at covering your teen’s car insurance is how far your dollar will go. Since teen drivers are inexperienced, they’re at a higher risk for an accident, which in turn causes the premium to be quite a bit higher for up to five years until they’re considered a safe driver by insurance providers. Adding your teen to your existing auto insurance policy will, of course, cause your premiums to increase.
What you’ll want to look at is how much cheaper it is to add your teen compared to them buying coverage on their own. This can help you decide which option is better in your case.
If you’re working on having your teen build financial independence but the rate would be cheaper if the plan was added to your own, consider adding them to your coverage and having your teen pay the difference. This way, your teen remains financially responsible for their insurance, but they get a better rate until they can earn one on their own.
What Kind of Insurance Does Your Teen Driver Need?
If you opt to let your teen buy their own insurance, make sure you walk them through the quote gathering process so they understand what type of coverage they’re getting. It can be easy to buy an expensive plan that doesn’t cover very much if you’re not careful. It’s important for them to understand what a deductible is and how it’s different than your monthly premium. A lower deductible is great if you’re accident prone, but it can also cause your monthly rates to increase exponentially.
The make, model, and age of your teen’s vehicle will also help dictate the types of coverage needed as well as play into what the overall cost range is.
Does Your Teen Have the Means to Cover Their Own Policy?
One of the most important questions to ask when considering covering your teen’s insurance policy is whether they have the means to afford the plan that’s truly right for them and how much they drive. If they’re working but also trying to pay for school and other expenses, they might not be able to afford a quality policy that protects them appropriately.
If they do have the means to purchase their own car insurance, there’s no reason they shouldn’t be paying for their own policy. This can also incentivize safer driving, as they know their rate will increase if they’re involved in an at-fault accident.
Whether or not you cover your teen driver’s car insurance will come down to a personal decision. There are ways to earn the best value on insurance and still have your teen driver remain financially responsible for their driving behavior.
“Drivers License -Teen driver” via Flickr by State Farm. Used with permission via CC BY 2.0 / cropped from original
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