You’ve probably heard a friend, family member or neighbor talk about the value of separating an accident prone teen driver off onto their own auto policy. It’s a common problem and an even morecommon question that parents of newly licensed drivers ask. In general, we usually find the effect of this to be adverse. Here’s why:
- Credit – in many states (including Michigan) insurance carriers use your credit to develop what is called an insurance score. Your rates are often largely determined by this number. Younger drivers generally don’t have as solid of credit as their parents do. Worse credit equates to worse insurance scoring = higher premiums.
- Experience (age) – insurance is like an inverted bell curve. The younger you are the higher your rates based on experience and potential for accidents and claims. The older you get the “better” your rates become until you peak out somewhere in your mid 40’s -60’s after which time rates may begin to creep back up based on – again – more mature drivers and the potential for claims. Most parents of teen drivers are in this peak range, thus making insurance more affordable for them and the drivers insured under them.
- Multi car/policy discounts – As a parent, you have other assets insured which give you access to multi car and also multi policy discounts which your teen driver probably does not have.
- Possible gaps in coverage – many teen drivers who obtain their own insurance are purely price based shoppers. This often equates to higher deductibles and lower liability limits. Additionally, if you as a parent have an excess liability policy in the form of an umbrella, you may not be fulfilling the liability limit requirements to be properly covered.
- You might be on the hook anyway! – If your young teen driver is involved in an accident, thus hurting someone and creating a liability situation – their liability limits might not be high enough to cover the damages and if they are still a member of your household the liability may transfer to you as the parent anyway!
Don’t be intimidated by adding a teen driver to your auto policy. It’s just another step in giving them responsibility and freedom. Show your teen the monetary effect of insuring them as well as what would happen if they had an accident or got a ticket. This helps in showing how important it is to be a vigilant and responsible driver.
For more information on why your teen driver should not have their own policy, contact Heather Mosher | VAST | 906.315.7235 | firstname.lastname@example.org