Getting a driver’s license is a rite-of-passage for both your teen and you. After all the potentially harrowing lessons and practicing, the day arrives that your baby is now out on the road by his/herself. While this time can be exciting, it can also be expensive, especially if you haven’t done any research on the implications of having a new driver – or a new car – on your auto insurance costs.
At Wharton & Power Insurance, we feel it is best for our clients to reach out to us before the big day. That way, we can help them weigh the effects on their insurance premiums once they have a youthful driver.
Most of our clients purchase a car for their child. However, the car they choose can make a huge difference in the cost of insurance. The value of the car will affect the insurance rate – so waiting to reach out to us until after the car purchase means it’s too late to include that factor in their choice.
Insurance companies typically require that the youngest driver be placed on the highest rated car in a family fleet, or on the car they drive. If parents purchase a new car for their child, there is little wiggle room since that new car is often also the highest valued car.
Once the driver turns 23 or 24, insurance companies assume he or she is entering young adulthood with a job and independent responsibilities, so insurance rates start to go down. The bubble from 16-22/23 is the most expensive time, and if you add accidents or tickets on, it gets even more so.
In the insurance world, a new car is anything 2-3-year-old and under. These vehicles cost more to insure because they cost more to repair or replace. Also, each car has an insurance industry symbol; the higher the symbol the more expensive the car will be for the insurer. Underwriters look at financial risk – putting a youthful driver on an expensive car means a greater risk of shelling out more money. The higher the risk, the higher the insurance cost.
If you are in a situation where you are able to pay cash for an older vehicle, then you can save money by only insuring it for Liability. Collision and Comprehensive are the most expensive coverages. Collision helps when your car is involved in a crash, so removing that coverage means you will have to pay out of pocket for repairs. However, rather than pay money to the insurance company for a potential occurrence, you will be paying a repair person for an actual situation. Comprehensive covers you if someone breaks into your car and steals something or if a tree falls on it, etc. If you are willing to cover the cost of the stolen item or the cost of repair, then you can save on this coverage too. Having just Liability can save you thousands of dollars over those expensive first 5-6 years of your child driving. And, the money you save on auto insurance can go into a savings account to repair the car when necessary.
Let’s face it – some cars are easier to handle than others. Jeeps are cool but they are hard to steer and park. Sports cars are fun but their high-speed capabilities can lead to mishaps. Youthful drivers are more expensive to cover because their inexperience leads to a higher percentage of fender benders. Lower your risk by purchasing a car appropriate to the experience of your driver.
The difference between a low and high deductible policy is negligible; the real savings is going to come from the age of the car and whether it is financed, leased or purchased outright.
If you have a child who will be driving soon, we recommend you reach out to your insurance agent to help you weigh the decisions behind your premiums. The Wharton & Power Insurance Team is here to help too. Send us an email or give us a call at 317.663.4138.