“Cut Their Premiums”
Drivers aged 16 to 19 have been, and will undoubtedly continue to be, the most difficult drivers to insure. Statistics confirm this age group to be the poorest drivers and the ones most likely to be involved in accidents. Accordingly, their insurance premiums remain high. However, there are effective ways of minimizing the high premiums that occur when your children become driving age.
Each insurance company differs in the way it rates its categories of drivers. Although some companies differ in the discounts they offer for young drivers, most standard insurance companies offer a "good student" discount, driver training credit and a student-away-at-school discount. Non-standard companies typically do not offer these discounts. Nevertheless, in addition to discounts, there are other ways to minimize the cost.
Shop early
Shop for a new policy before a child turns 16. Although each company underwrites differently, I have found that all of the companies we represent prohibit 16-year-olds from being included on a preferred policy when a new policy is written. Therefore, try to lock in a policy in a preferred tier prior to the child's 16th birthday. Then, when the child turns 16 and gets added to the policy, only a surcharge would apply. The insurance company would not re-underwrite the policy.
Avoid the ratio of cars = drivers
Youthful operators encounter various problem situations, such as when the number of cars equals the number of drivers in the household. In this scenario, the child will be rated as the primary operator of a vehicle even if the child drives it only occasionally. For example, in a three-car, three-driver (parents and a 16-year-old boy) household, each person will be assigned as the primary driver on one of the vehicles; it does not matter that the son shares one car with his mother and that he rarely drives. The result is commonly referred to as an "inexperienced youthful operator charge" and can appear on a bill until a youthful driver has acquired three years of driving experience.
Let's take a look at some ways to get around this problem and minimize the higher premium charges. Oftentimes, parents buy newer cars that require physical damage coverage, but you could consider owning an older car that requires only liability coverage. You could also own fewer cars than there are drivers at home. To the same household above, let's add a 20-year-old child who is attending college within 100 miles from home. In this scenario, we assume the 20-year-old is the primary operator of one vehicle, even if that person does not have a car at school. (In this way, the 16-year-old will not be "assigned" to a vehicle and charged such a high premium.) Many companies will also give a discount when a youthful operator is away at school without a vehicle, but that discount would not apply if the student were considered a principal operator.
Other solutions
To further complicate the above scenario, assume that the 16-year-old was involved in an accident about three months ago and he also has received a speeding ticket. Although everyone else in the household has a clean driving record, the insurance has soared. There aren't too many ways around this, but one method we have used is splitting up the account. In order for this to be done, the same agent must write both accounts. Some companies will allow one policy to be written for the good drivers and one policy for the bad.
The specifics of how this policy is written are rather simple. The parents and the 20-year-old are listed on one policy with two cars. Another policy will include all four drivers (including the 16-year-old), so that anyone can drive the third car. The second policy will continue to be written in the parents' names, in order to take advantage of their credit and discounts. The trick is that the car used for the second policy should be the one that the 16-year-old actually uses. This can drastically reduce the premiums and provide a way for the parents to break out the actual cost of what that youthful operator is doing to the family’s insurance costs.
-Ryan Novak is Vice-President of NIA Property-Casualty Insurance Clearinghouse, a recommended expert alliance of http://www.TheMoneyExpert.com
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