Teenagers: Being independent can cost you.
Teenagers who piggyback on their parents’ car insurance will add around 77% to the cost of their family’s policy, but it would cost them almost 20% more than what their parents are being charged if they took out their own insurance plan, according to a study recently released by Bankrate.com. It commissioned analysis firm Quadrant Information Services to measure the difference between the two policy options using data from the largest carriers, who represent 60% to 70% of the market.
“Parents who wish to foster financial independence can still ask their child to pay for all or at least some of the increase,” says Laura Adams, a senior analyst stated.
This “penalty” for buying individual insurance instead of being part of a family plan is much higher in some states, the study found. In Tennessee, the price increase is approximately 10 to 25% more when the teen is insured alone.
Young drivers, who are regarded as more high risk than married drivers, will be penalized if they are single, a separate study revealed. A married 20-year-old pays 21% less than a single 20-year-old for the same car insurance policy. However, at 25 years of age, the average marriage savings falls to 7% and hovers at just 2% at age 30 and beyond. Hawaii is the only state where insurance companies are not allowed to factor marital status into their rate calculations.
Insurers tend to favor older drivers up to a point. Rates decrease every year until age 60, Adams says, fall 41% between ages 20 to 25 and 18% from ages 25 to 60. But rates rise for seniors.
And there are fewer young drivers for insurers to cover these days. Two decades ago, 70% of 18-year-olds had their driver’s license versus 54% today, according to BankRateInsurance.com, due to the rising cost of cars, increased teen unemployment, and the use of social media in lieu of face-to-face time. Larger, heavier family cars are safer for younger drivers, and their insurance rates tend to reflect that. High school and college students may also sign up for safety programs to cut their rates and many insurers offer a “good student” discount for those with B averages or better.
We discuss these issues weekly with our customers and prospective insureds. There are ways we can help to reduce the costs of insurance premiums for young people at a time when Mom’s and Dad’s dread that new teen driver premium. If we can help you or someone you know facing these transitions with teen drivers, we’re ready! Contact us by EMAIL at info@BentonWhite.net or call any of our staff at 615.377.1212. We can help you save some money with discounts our companies offer!
[Portions of this blog post taken from an article on MarketWatch.com – written by Moneyologist, Quentin Fottrell, Personal Finance reporter]
