Teen drivers from 16 to 19 years old have the greatest crash risk among all age groups. Studies show their serious crash rate is nearly three times that of drivers ages 20 and older, based on miles driven. Inexperience leads to more mistakes and poor hazard awareness, which leads to increased chances of accidents. Auto insurance aims to cover the financial impact of these accidents. Every state needs drivers to have minimum liability coverage. For example, North Carolina requires at least $30,000 for one person and $60,000 per accident in bodily injury coverage. Insurance ensures teen drivers follow the law and prevents penalties such as fines or license suspension. A good auto policy also protects the family's finances. When a teen causes injury or property damage, parents are often legally liable for the damage. Insurance helps cover medical bills and car repairs so that family members do not have to pay large out-of-pocket costs.

What are the Factors That Affect Teen Auto Insurance Rates?

Here are five factors that affect teen auto insurance rates.
  1. Driving Experience: A lack of experience is a risk factor for crashes among novice drivers. The Insurance Institute for Highway Safety confirms the crash rate for 16-year-old drivers is about 1.5 times as high as for 18- to 19-year-olds. Insurers charge higher premiums because there is statistical evidence that newly licensed teens are more prone to accidents.
  2. Age & Gender: Younger, male drivers usually have higher insurance rates. CDC data from 2020 shows male teen drivers (16–19) had a crash death rate three times higher than female drivers in the same age group. Insurance rates reflect this specific, high-risk profile.
  3. Vehicle Choice: The type of car affects the cost to insure. Expensive vehicles or vehicles that have high repair costs mean high premiums. A study, published in JAMA Network Open, found that vehicles that were more than 15 years old had a 31% higher risk of driver death in fatal crashes compared with newer models. Vehicle safety ratings are important for a premium.
  4. Location: Where a teen lives and drives impacts the policy cost. State laws determine the minimum coverage that driving laws require drivers to have, which establishes a baseline. Furthermore, insurers examine local accident statistics, theft rates and traffic congestion in the area. High-risk locations require higher premium insurance.
  5. Academic Performance: Insurers provide a discount based on a teen's academic accomplishments, often referred to as a "good student discount." Companies generally require a student to maintain a "B" average or higher, sometimes a 3.0 GPA. Research has shown a positive correlation between grades and the risk of driving. This discount reduces the premium.

What are the Coverage Options for Teen Drivers?

Here are five common coverage options for teen auto insurance.
  1. Liability Insurance: Liability coverage covers the damages a teen driver causes to others in an at-fault accident. It includes expenses such as the other driver's medical expenses and property damage. Most US states have minimum liability requirements to legally drive. This coverage insures the insured against direct financial liability for damages to third parties.
  2. Collision Coverage: Collision insurance pays for the repair or replacement of the teen's vehicle, whether it is at-fault or not. This coverage covers when the car strikes another vehicle or something else such as a fence or tree. Many lenders insist on this coverage if there is a greater loan or lease on the vehicle.
  3. Comprehensive Coverage: Comprehensive coverage gives coverage for damage to your vehicle caused by non-collision occurrences. It insures against non-crash related events like theft, vandalism, fire, or damage from natural disasters. The coverage also usually covers broken glass, such as a windshield crack. This coverage has a deductible.
  4. Medical Payments / Personal Injury Protection (PIP): This type of insurance covers medical care for your teen driver and their passengers in the case of any accident. Medical Payments coverage covers a fixed amount, no matter who was at fault in the collision. PIP has wider coverage, usually including lost wages and rehabilitation costs, depending on the requirements of the state.
  5. Uninsured / Underinsured Motorist Coverage: This coverage protects the teen driver if they get hit by another driver who has little or no auto insurance. This covers both Bodily Injury (UMBI) and Property Damage (UMPD) coverage. This is an important safety net, as approximately 1 in 8 drivers on US roads are uninsured.

How to Save on Teen Auto Insurance?

Here are five methods parents and teens use to save on auto insurance costs.
  1. Good Student Discounts: Insurance companies give a discount to teenagers who achieve good grades. They need to have a minimum B average or GPA of 3.0 to qualify. Academic achievement is an indicator of responsible behavior, which insurers see as an indicator of lower driving risk, lowering the premium.
  2. Driver Education Courses: An insurance discount is given for taking a certified driver education course. These courses develop practical knowledge and understanding. Many insurers offer this discount for drivers under age 25 who complete a certain approved program.
  3. Adding to Parents’ Policy: Adding a teen driver to a family policy is less expensive than adding a separate policy. Combining a number of policies makes the household eligible for multi-policy discounts. Having the teen added to the existing coverage lowers the overall insurance rate.
  4. Telematics & Safe Driving Apps: Driving behavior is monitored with an app or device. The system maintains track of braking and speed. Good behavior (as proven by the data) entitles the teen driver to reduced insurance rates and special discounts from the insurer.
  5. Choose the Right Car: Vehicle type has a considerable bearing on the rate. Choosing an affordable, safe and reliable car reduces collision and comprehensive costs. Models with higher safety ratings and lower performance usually cost less to insure.

When to Update a Teen’s Insurance Policy?

Here are four times when you update a teen's insurance policy.
  1. New License Stage: When a teen goes from a learner's permit to a driver's license, it is important for parents to notify their insurer. Insurers often require this update within 30-60 days of the date of the license issue. Failure to list the licensed household driver voids the policy in the event of a claim.
  2. New Vehicle Purchase: Policy needs to be changed; the teen buys a car and registers it in their own name. The teen must be the named insured on a separate policy written for the new car. When the car remains on the parent's policy, the insurer requires information to make adjustments in policy coverage.
  3. Driving Milestones: Rates also tend to change automatically at certain ages, like 18 and 25. Drivers experience a huge rate drop around the age of 25. Insurers also re-evaluate premiums if the teen keeps a clean driving record without any accidents for a period of years.
  4. Moving Away for College: There is a need for a policy update when a full-time student goes to college. The "distant student" discount is applicable; the car is home and school is more than 100 miles away. The policy requires the new garaging address upon the student taking the car.