Tuesday, August 19, 2008

Teen Driver Auto Insurance - What You Don’t Know Will Hurt You

In today’s article I want to talk to you about a little known loophole in NC insurance law that could be costing you a lot of money if you have a teen driver on your policy. I’m not sure if this law applies in other states but in NC it is a nasty little trap to catch some of your money and funnel it to the rich insurance companies.

Lucky for you, you bothered to check in on my blog. This little tidbit saves the average teen driver family about $389 per year for the 3 years that their teen is a driver on their policy. It might even save you more than that.

To understand this premium trap, you first must understand how insurance companies charge for teen drivers. Basically there are 3 tiers of rates for your teen as the teen becomes more experienced. These tiers are related to the number of years the teen has been licensed. For example, when you teen first receives his or her license, you are charged the highest tier 1 rate because as a new driver your teen’s chance of having an accident are very high. On the anniversary of the day that they received their license, they are eligible to be moved into the 2nd tier which of course has a lower rate than the first tier. On the 2nd anniversary of their license then they can move to tier 3 which is even lower cost than tier 2 and on the 3rd anniversary of your teen’s license then they are considered to be an experienced operator and none of these very expensive inexperienced operator surcharges apply any more.

But here is the rub. In NC you are eligible to move your child from a higher rated tier to the next tier on the date that your child reaches each year of experience. That means that the very day they are eligible for the new tier, your policy can be adjusted and a refund sent to you even if your policy doesn’t renew for another 11 months. However, the insurance companies are not required to make this change in the middle of a policy term if you don’t request it. If they don’t hear from you, they are allowed to simply wait until your next renewal and then make the adjustment. This could mean that you pay the higher rate for a year longer for each tier! Sadly, many insurance companies have chosen to exercise this right as a way to increase their premiums. So now in many cases it is up to the consumer to ask for the rate reductions that are due them in the middle of the policy term.

At Clinard Insurance Group we flag our teen driver files to automatically send a mid term request letter to adjust the rates on each anniversary date of the teen’s license. We feel that it is important that our clients don’t get caught in this obscure premium trap. If you are not one of our clients, I hope that you will pay attention to your teen’s license date and notify your company that you would like to have your policy adjusted at the anniversary date of your child’s license, not at the policy renewal date. Insuring teen drivers is expensive enough for families, there is no need to throw away more money simply because you didn’t understand the rules.

Tuesday, August 5, 2008

Why Are Insurance Rates For Teens So High?

As an insurance agent, this is probably one of the most frustrating responses I get from parents who are adding their teen to their car insurance. I understand this frustration and after I explain the reasons, they usually respond with “But, my teen is a good driver…”

That may be true and you’ve probably spent countless hours helping your teen become a safer driver. If you have, then you should be glad that the chances of your teen getting into an accident will be less likely than most teens on the road. But let me emphasize… Less Likely Than Other Teens… not experienced drivers.

It takes thousands of hours behind the wheel to get the experience to avoid accidents and become the safest of drivers. And this can take years. Here’s a statistic to prove this point.
The crash rate for 16 year olds is nearly 3 times higher than 19 years and nearly 6 times higher than drivers 20 to 24 years old.

Unfortunately, you are going to have to pay high rates for your teen to drive. But, you can take steps to avoid paying the highest rates and keep them down. Here are the steps you should take:
Step One- Use an insurance agent that specializes in insuring teen drivers. Family Insurance Specialists represent companies that offer good rates but most importantly offer quality insurance protection that can help you avoid paying out of your own pocket for an accident if your teen causes an accident.
Step Two- Make sure you are getting every discount you deserve. Available discounts may include safe driver, claims-free, good grades, multiple policies with the same company, and in some states you can qualify for a lower rate by keeping a good credit rating.
Step Three- Buy a safe, older, lower profile vehicle for your teen to drive. Make sure it has airbags and anti-lock brakes and is not considered a dangerous vehicle. Your Family Insurance Specialist can help you decide which vehicles are least expensive to insure.
Step Four- Increase your deductibles or drop the collision on older vehicles. If your teen is driving an older, less expensive car, you can “self insure” the car. That means of course, if something happens, you’ll have to pay for the damages to your car, but it can save you a lot of money- nearly 1/3 to 1/2! With my teens, they had minor bump ups to their cars and we just fixed what we had to fix to keep the car operating safely. Since they were driving older model cars anyway we could swallow the dings ourselves.
Step Five- Get a Teen Driver Monitoring Device installed in your teen’s car. In some states, some insurance companies offer special discounts for these systems. The greatest advantage of these systems is that this will most likely prevent your teen from speeding. Speeding tickets can greatly increase your insurance rates and jeopardize your insurance coverage. Insurance companies know that if a teen driver gets a speeding ticket, the likelihood of an accident in the near future is great. You could get cancelled and it may be more difficult to get another insurance company to pick you up.

To learn more about how you can get the right protection for your teen driver, find out other ways you can save on your car insurance, visit my web site by clicking here.