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.