Handing your car keys to your teenage son or daughter, driver’s license in hand, and watching them drive away alone for the first time is enough to terrify even the most laid-back parent.
For some, it’s a worry about their child driving safely and being responsible. For others, though, that nightmare comes in a different form: the cost of auto insurance for a teenager.
When do you need to add your teenage driver to your auto insurance? And how badly will the new bill hurt your wallet?
That’s what a listener of the Clark Howard Podcast recently asked.
What Do I Need To Know About Auto Insurance for My Teenager?
What do I need to know about auto insurance for a teenager?
That’s what a Clark listener asked on the June 20 podcast episode.
Asked Kirk in California: “What does Clark think about car insurance for a 17-year-old teenager learning to drive in our family cars once or twice a week for an hour each time?
“And what about after she gets her license? Do we need to add her as a driver on the cars? I assume this will drastically increase our yearly insurance. I don’t want to ask my insurer as they may tag us for higher insurance.”
Let’s start with the distinction between a learner’s permit and a driver’s license as far as insurance is concerned. Because it’s a big one.
“So long as your teen is under a learner’s permit, you’re OK. Most insurers don’t charge extra because they know they’ve got that other set of eyes in the vehicle with them,” Clark says.
“But once a teen takes the driver’s test, passes and has a license, then you’ve got to tell your insurer.”
So, in Kirk’s case, his 17-year-old daughter with a learner’s permit driving the family car once or twice a week while accompanied by a parent should not cost him anything.
But once his daughter gets her license, it’s a whole different ballgame.
How Much Will It Cost To Insure My Teenage Driver?
To a degree, the answer depends on the state where you live. Each state regulates its own insurance rules, as Clark points out.
It also depends on your child’s age and gender. A 16-year-old will cost more than a 19-year-old and a male will cost more than a female.
According to a 2022 CarInsurance.com study, the average cost of adding a teen to your auto insurance policy is $3,798 per year. That’s $316.50 per month.
Imagine having two teenage boys while living in a state where auto insurance is more expensive. Those costs can become prohibitive for some families.
“What we’re talking about here, Kirk, is why one-third of people no longer get a driver’s license even up to age 18. Because they can get a learner’s permit,” Clark says.
“But once you get a license, the auto insurance rates for a teenager are crazy, crazy high. Thousands and thousands of extra dollars per year per teen driver, typically in most states.”
What Can I Do To Limit the Cost?
There are a few ways you can prevent such a massive additional cost year after year. But they aren’t exactly akin to the fun of a family outing at Disney World.
- Option 1: Delay getting a license. The longer you wait to allow your son or daughter to get a license, the less expensive your auto insurance bill will become. The cultural desire to get a driver’s license has diminished in the last decade or two. So maybe this is an option for more people. Still, it’s less fun to remove this long-time rite of passage.
- Option 2: Renounce your teenager’s license. What do you do if your teenager already has a license? “I remember taking a question from a parent who was absolutely stunned that the insurance was so much money for their new teen driver,” Clark says. “And the only answer I had for them was to turn the teen’s license back into the state, which is a terrible thing to have to say. But if I remember right, it was almost $5,000 extra a year for adding that teen driver. And who can afford that?”
- Option 3: Buy your child a cheap used car. It may be less expensive to buy your teenager an old, beat-up vehicle and pay for a liability-only insurance policy than to add your child as an insured driver of your own vehicle. “That will vary by insurer whether that’s going to be the cheapest way,” Clark says.
Children can be expensive.
Outside of paying for college, one of the largest bills you may encounter is when your teenager learns how to drive.
Once they get their license, you’ll either have to pay in the neighborhood of $4,000 a year to add them to your insurance or you’ll need to get them a low-value old car. That way you can buy them a cheaper liability-only auto insurance policy.
The good news is that most insurance companies aren’t going to charge you for a teenage driver with a learner’s permit.
If you want to give your teenager the full experience of becoming a licensed driver, just make sure you plan ahead with your budget.