Informative article from NY Times about the cost of insuring teens on the parent’s auto insurance policy.  First, the bad news:

Eighteen-year-old drivers add an average of 77 percent to the cost of their parents’ auto insurance bills, a new analysis from insuranceQuotes.com found.

Yes, you read that right.  So, assuming parents carry auto insurance with a cost of $1,000 when you add that 18 year old, voila, that bill will rise to $1,770. Ouch! For those teens whose parents say “go get your own policy!,” the news is even worse…

Eighteen-year-old drivers pay an average of 18 percent more if they buy an individual policy, instead of remaining on their parents’ policies.

So, how can teenagers help cushion the blow of this increased cost?  The article provides a few ways to score discounts from auto insurers:

• Clean driving record helps reduce costs over time
• Being a good student
• Increasing the size of the deductible (but beware as inexperienced drivers more likely to have accidents!)
• If student goes away to college WITHOUT a car, you should qualify for lower premiums

Might be an interesting activity for new drivers to sit down with their parents and figure out how much they are costing their parents when it comes to auto insurance (OK, maybe not the most uplifting conversation).

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Check out the NGPF lesson: The Cost of Commuting

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.