Should You Insure Your Teen’s Car Separately?

by Mike Sabourin – Marketing Manager

I recently had a friend call me to talk about his new driver, who will be getting his license soon. He went on to ask about writing another policy for his older children with less coverage to save him money.

Parents have a lot of questions about insuring their teen driver’s car. The most common: Should parents title and insure a teen driver’s car separately from other cars in the household?

Here are some specific considerations that will help you decide just that.

Why Insure a Teen Driver’s Car Separately at All?
Parents think about insuring their teen’s car separately because doing so allegedly can:
• Save money on the premium
• Reduce potential liability for parents

However, these are surface-level considerations. The reality is that insuring a teen driver’s car separately can open big gaps in coverage for which parents will likely be responsible.

This makes it important to consider all of the following factors to make an informed decision regarding your teen’s auto insurance coverage.

Adding a Teen Driver Can Increase Your Rates
Adding any driver to your auto policy will increase your rates because another driver means a greater potential for accidents.

However, adding a teenager might increase your rates more due to their inexperience and greater likelihood of accidents.

The solution: Offset some of the increased costs by having your teen driver complete a driver’s education or defensive driving program. Many insurance companies offer a “good student” discount, too.

You Might Still be Responsible for Your Children’s Negligence, Even If They’re On a Different Policy
In many states, parents are legally responsible for their children’s actions. This is especially true if they’re minors.

This means that parents could still be sued for their child’s actions behind the wheel, regardless of whether the teen driver has a separate policy.

If the teen has a separate policy, the parent’s auto insurance might not come into play, and the parents could be left with a very large bill.

Multiple Teen Drivers May Only be Covered by a Lesser Policy if You Place Your Teen on a Policy With Less Coverage
Most auto policies limit coverage for the use of a vehicle that is owned by a family member and not specifically covered by another insurance policy.

What this means is that while the limitation may not apply to the parents (because they have their own policy), it does apply to any other family member who is normally covered by the lesser policy.

For example, if a 16-year-old borrowed his 18-year-old sister’s car, which is covered by a lesser policy, and he got into an accident, he would only have coverage under his sister’s policy.

Thus, the parent’s policy — which provides for greater liability coverage — is unavailable to the 16-year-old driving his sister’s car. And, depending on the state, because he is still a minor, his parents could be liable for damage he’s caused and be stuck without coverage.

The Bottom Line
The bottom line is clear: Putting your teen driver on a separate policy might lead to short-term savings with long-term costs if an accident occurs.

An alternative to the separate policy route is to explore the following methods of reducing rate increases:
• Defensive driving courses
• Good student discounts
• Establishing safe driving habits that lead to lower rates on renewal

The bottom of the bottom line is that you should discuss your family’s needs with your agent.

Independent agents represent multiple insurance companies and can help you find the right fit for your teen driver’s needs.