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by Christy Bieber | Published on Sept. 10, 2022
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Read this before shopping for auto insurance for a teenage driver.
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Car insurance is priced based on risk, with insurance companies charging more for people who they believe are likely to cause collisions. Unfortunately, teen drivers are considered to be risky to insure. Not only do teens lack driving experience, but they are also not generally known for always making responsible decisions.
This means that parents who add a teen driver to their car insurance policy can generally expect a hefty premium increase. The good news, however, is that finance expert Dave Ramsey has some tips on how to save on teen car insurance costs — and following them could help ensure premiums don’t go through the roof.
Ramsey recommends that teens complete a driver’s education course before getting on the road. This not only can help to reduce the costs of insurance, but it can also reduce the likelihood of a crash, to help young motorists stay safe behind the wheel.
Another way teens can save, according to Ramsey, is to do well in school so they can qualify for a discount based on their academic record. “Your teen’s report card could save you money,” Ramsey said. He indicated that young drivers typically need a B average or better in order to be eligible for savings based on being a good student.
The next tip from Ramsey is to avoid buying a brand-new vehicle for young drivers.
“Giving your teen the keys to a new car is like cosigning a loan with your broke cousin Joey for his latest business venture—it’s a really bad idea,” Ramsey warned. Even a car model that’s just a year old could be significantly less costly to insure — as well as cheaper to buy.
For teens who actually drive responsibly, Ramsey recommends opting into a program where insurers can monitor driving. Many insurance companies now offer an app that tracks how policyholders drive and offers a discount for those who practice safe behaviors behind the wheel.
“You plug a device into your vehicle and drive around with it on your car for 30–90 days,” Ramsey explained. “Insurers look at things like daily mileage, hard brakes, rapid acceleration and the time of day (or night) you drive—all of which can affect your risk. For teens, that can be an incentive to pump the brakes and drive more safely.”
Finally, Ramsey’s last tip is to make sure to compare policy rates among different insurers, as some charge much more to provide coverage for teens than others do. Ramsey suggests working with an independent agent to check the prices on offer from different providers, but motorists can also do this themselves by going online.
By following these five tips, hopefully parents and teens can ensure that getting the right coverage in place doesn’t break the bank. Since auto insurance is required by law and is essential to protect assets, it’s worth making the effort.
Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we've researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.
Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has been featured on major outlets including MSN Money, CNBC, and USA Today.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
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