Vaught Wright & Bond Insurance, Inc.

One of the scariest times for a parent is when the dreaded driving years approach. Not only are you terrified of the dangers involved, the worry and uncertainty of the costs of adding a young driver are enough to keep us up at night. I am amazed at how often parents do not follow some simple guidelines that make the transition a lot smoother and less costly. Here are a few basic strategies that can save thousands of dollars.

1. Provide the teen with a car that you can afford to lose. The temptation can be strong to purchase a “cool” car, particularly if you can find one with a reasonable monthly payment. A problem with taking out a car loan, is that the lender will require you to carry insurance to pay for damage to the vehicle, generally with a  low deductible. The cost for this insurance is shockingly high for young drivers.

Here is an example. Let’s say you negotiate a $150 monthly car payment on a nice used car. It may sound affordable, but don’t be surprised to see your insurance payment increase by $200 or more per month. Suddenly your annual cost for the additional vehicle has ballooned to $4200, and that is before paying for gas, vehicle registration, or maintenance! If your teenage angel manages to get a ticket, or is involved in a fender-bender, the cost will likely go considerably higher. Unless you are willing to pay for the additional insurance cost, do your best to avoid a car loan on your teen driver’s vehicle. Your liability coverage, which is mandated by law, will still pay damages (up to the policy limits) to repair another vehicle if your child is at fault in an accident. Unfortunately, you are responsible for damages to your own vehicle if you are at fault and do not have collision coverage.

2. Consider Comprehensive (other than collision) coverage. For a low premium, this will protect the new vehicle against theft, cracked or broken windshields, and many other common claims.

3. Call your insurance agent to get the estimated cost for any vehicle you are considering, even if it is one you already own. A good friend called to tell me that he had just purchased a new Ford Mustang for his 16 year old daughter. He nearly passed out when he found out how much the premium would be. I asked him why he hadn’t called to ask before he bought the car. Apparently he made a promise to buy the car if she earned straight “A’s” on her report card, and he never thought she would actually do it. In this case he says it was worth every penny. Still, he might have considered offering a less flashy car as an incentive.

4. Consider options. Adding a young driver can more than double your current premium. In our agency, we find it worthwhile to quote with at least 5 companies to be sure the coverage and rates are good. Every family’s situation is different, and needs to be evaluated individually. That is why we represent dozens of carriers; you never know which will be the best fit until we see and evaluate your situation.

5. Don’t be foolish with inadequate limits. Okay, this one won’t save you money on your policy, but it could save your financial future. Nothing aggravates me more than seeing smart people with bad insurance. In my opinion, agents who sell minimum-limit policies should not be allowed to represent their clients; they certainly are not doing their job of protecting the public. There are rare exceptions, but the cost for higher limits is not as significant as what is at stake. You could lose everything from a single accident if something were to happen with you or your child at the wheel. A moderate collision with a luxury car can cost $60,000 or more. If your property damage limit is $15,000, would you be able to afford the remaining $45,000 out-of-pocket? You will be responsible for paying it as soon as the repairs are made. Even though your young driver may not own much in terms of assets, a financial judgement against them could haunt them for decades.

We sincerely hope you will keep these suggestions in mind when the time comes for your child to take the wheel, or make the changes now if you already have young drivers in the household. Feel free to contact us if you have questions.

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