Teen Drivers - One Policy Or Two?

One question that I am often asked by parents of teen drivers is whether or not they should put the child’s car on their policy or if they should have their agent write a separate policy just for their child. Each situation is a little bit different of course but in general the answer is that you should put insure your teen driver and their car on your policy.

There are several reasons why this is a better strategy. Some of these reasons are to reduce the cost of your auto insurance for your teen driver and some are to better protect your assets. I am making the assumption that the vehicle is titled in your name and that your teen driver is still a minor.

Reason #1 - Multi-car discount. Most every policy allows a discount on your auto insurance if you have more than one vehicle on the policy. This discount can be as high as 15% in some states. If you put the teenager and his or her car on their own policy, you will be passing up this discount.

Reason #2 - Multi-policy discount. By now most insurance consumers are aware that they will have a lower rate on their home and their auto policies if they purchase both from the same insurance carrier. However, if you write your teen driver on a separate policy, most insurance companies will not extend the multi-policy discount to that new policy. This means you will be giving up another valuable discount which in most states will run as high as 15% or even more.

Reason #3 - Access to higher limits. When your teen starts driving, the risks of an accident increase. Not only do teens have a much higher rate of accidents, their accidents generally involve much greater bodily injury and property damage losses. This is the time that you should purchase the highest liability limits that you can afford. Here’s a simple test: Check your policy for the limit for bodily injury coverage. Now ask yourself if that limit exceeds the value of your home. If not, then every time your teenager hits the road, you might be putting your home on the line. Now, if you choose to write a separate policy for your teen driver, in most states you will find the limits of liability that you can purchase on that vehicle will be limited. In NC that limit is generally $100,000 per person for bodily injury coverage. By keeping your teen’s vehicle insured on your policy, you will be able to provide higher limits of coverage on that vehicle.

Reason #4 - Insurance Score issues. In most states the insurance rate on a policy is directly related to the “Insurance Score” of the policyholders. The “Insurance Score” varies by company in terms of how it is calculated but in general the insurance company is looking at your credit score and other parameters. Generally speaking the insurance scores for an adult will be many times better than those for a teen left to stand on their own. This means that by keeping your child and their vehicle on your policy, you can lend them the support of your superior insurance score to keep the rate on their vehicle lower.

You should always check with your agent before making the final decision about how to insure your teen driver but in almost all cases the choice is clear. Keep your teen driver and their car insured on your policy.

If you would like more information about teen driving safety and insurance issues, please click here.