A checklist for insuring your new teen driver

A new driver is rated on the one thing that is missing: a record. Carriers price inexperience at the top of the table and let it fall over the years as the record fills in without claims or violations. That makes the first two or three years the expensive ones, and it makes the household's decisions in those years, about which car, which limits and which discounts, worth more than they will ever be again. It also raises the household's liability exposure at the same time, because a teenager causing a serious crash is sued through the parents' policy and, past its limit, through the parents' assets.

This checklist runs in time order, from the permit to the first renewal after licensing, and is written for parents in Arizona, Nevada, Utah and Idaho. It covers what to tell the carrier and when, how to structure the policy, and the handful of choices that move the premium without moving the protection.

Before the permit: what to gather

The carrier will ask for these on the first call, and the answers shape the quote.

• The current auto declarations page: vehicles, drivers, limits and deductibles as they stand.
• The teenager's full name, date of birth and, once issued, the permit or licence number.
• Which vehicles the teen will drive and how often, and whether a car will be bought for them.
• Whether the teen will live at home, board at school, or attend a school far enough away that the car stays home.
• Driver education certificates, school transcripts showing grades, and any completed defensive driving course.
• The umbrella policy's declarations page, if there is one, because it also has a driver list.

During the permit: tell the carrier, but ask how it rates

A learner with a permit drives only with a licensed adult in the car, and carriers treat that stage in one of two ways. Some do not rate a permit holder at all and only ask to be told; others add the learner as a driver at a reduced rating. The policy language governs, so the first item on the checklist is a call to the carrier, or to us, to report the permit and ask how it is treated. Reporting is not optional. A household member who drives regularly and is not listed can be a basis for the carrier to deny a claim or to rescind the policy for a material omission, and a permit holder driving the family car with a parent beside them is exactly the situation the carrier expects to hear about.

The permit months are also when the premium can be prepared for. Ask the carrier what the premium will become on the day the licence is issued, on each of the vehicles the teen might be assigned to. The difference between assignments is often the largest lever in the whole exercise, and it is easier to buy the right car before licensing than to swap afterwards.

At licensing: add the driver and choose the structure

On the day the full licence is issued, the teen is added to the policy as a rated driver, effective that day. The question that follows is how the carrier assigns drivers to cars. Some carriers assign each driver to the vehicle they drive most; others assign the highest-rated driver to the highest-rated car by default, which puts the teenager on the newest, most expensive vehicle in the household whether or not they drive it. Ask which method applies and, where there is a choice, assign the teen to the oldest, safest, most modestly valued car, and make that the car they actually drive. A declared principal-operator arrangement the household does not follow is a misrepresentation the carrier can find after a claim.

Keep the teen on the parents' policy rather than writing a separate one in the teen's name, in nearly every case. The household policy carries the parents' limits, their discounts and their multi-car and multi-policy pricing; a separate policy on an inexperienced driver is rated with none of those. The exception is a teen who owns a car titled in their own name and lives elsewhere, where a separate policy may be required. If a car is bought for the teen, title it in a parent's name unless there is a reason not to; the owner is the one who can insure it without difficulty.

Consider the deductibles on the teen's car. A higher collision deductible on the oldest car lowers the premium and reflects the reality that a small scrape on an older vehicle is often not worth claiming. On a car worth little, dropping collision and comprehensive entirely and self-insuring the car's value is a legitimate choice, though not for a car with a loan on it.

Limits: raise them, do not lower them

The instinct when the premium doubles is to cut coverage to bring it back down. The correct move is usually the opposite. A teen driver causing a multi-vehicle crash with injuries is the scenario that exhausts bodily injury limits, and the parents are the defendants because the teen drives on their policy and often under their responsibility as a minor. Each state sets a minimum liability limit; the minimum is what a driver with nothing to lose can carry, and a household with a home, savings and income should carry much more. The cost of moving from the minimum to a limit several times higher is modest compared with the jump the teen already caused, because liability limits are priced on the driver's risk multiplied by a limit factor that grows slowly.

This is also the year to add an umbrella policy if the household does not have one. An umbrella adds a layer above the auto limits at a price that reflects the low probability of a claim reaching it, and it requires the auto policy to carry certain underlying limits, which is a useful discipline. It will ask for the teen to be listed too. Uninsured and underinsured motorist coverage should match the liability limit; a teenager is as likely to be hit by an uninsured driver as anyone, and that coverage pays for their injuries.

Discounts that are real

Carriers offer several reductions aimed at young drivers. Each has a condition, and the condition is what to check.

• Good student: a grade average above a threshold the carrier sets, proven by a transcript, renewed each term or year. It is one of the larger discounts and lapses if the grades do.
• Driver training: completion of an approved course, with a certificate. Ask which courses the carrier accepts before enrolling.
• Distant student: a teen attending school beyond a set distance from home without a car stays on the policy at a much reduced rating. The distance and the no-car condition are the carrier's, so confirm them.
• Telematics: a device or app that records how the car is driven and rates it. For a teen who drives carefully this is a real reduction; for one who does not, it can go the other way, and the data belongs to the carrier.
• Safe-driver or parent-teen agreements: some carriers reduce the premium for a signed household driving contract, a curfew or a course taken together.
• Multi-car and multi-policy: already present on most household policies, and a reason to keep the teen on it.

After licensing: the first year and the first ticket

The first renewal after licensing is when the household sees the full-year premium and can revisit each decision above with a year of actual driving to look at. If the teen is now away at school without the car, the distant-student rating applies and the carrier needs to be told. If a car has been added or retired, the assignments change. If the good-student grades are in, send the transcript before the renewal is rated rather than after.

A first ticket or a first at-fault claim is rated at the next renewal, and its effect on a young driver's premium is large because it confirms the risk the carrier was already pricing. In all four states a minor traffic conviction can often be kept off the record by attending a defensive driving school once within a period, if the court allows it; ask the court, not the carrier, and do it before the conviction is entered. A small at-fault claim, a parking-lot dent on the teen's own car, is often better paid out of pocket than claimed, for exactly the reason a small claim on any policy is: it is rated for years and pays little after the deductible.

Keep the teen listed even when they are not driving much. Removing a driver who still lives in the household and has access to the keys, to save premium, is the omission that ends in a denied claim, and a driver excluded by a signed named-driver exclusion has no coverage at all if they drive.

A worked example

Suppose a family in Gilbert insures two cars, a three-year-old SUV and a twelve-year-old sedan, for say $2,400 a year with liability limits of $100,000 per person. Their son gets his licence at sixteen. The carrier assigns the highest-rated driver to the highest-rated car by default, and the renewal quote comes in at $5,200. The family asks for the son to be listed as principal operator of the sedan, which he drives to school, and the quote falls to $4,300. They raise the collision deductible on the sedan from $500 to $1,000, saving $150, and raise the liability limits on both cars to $250,000 per person, adding $220, then buy a $1,000,000 umbrella for $300. The son submits a transcript for the good-student discount and completes an approved driver course, together worth $500. The household ends the year at about $4,170 for the autos and $300 for the umbrella: higher than before by a wide margin, as it must be, but with the son on the right car and the family's assets behind limits that would actually hold in a serious claim. Every figure is hypothetical.

How to use this

Send us the declarations page and the permit date and we run the licensing-day premium on each vehicle assignment, list the discounts the household qualifies for, and quote the liability increase and an umbrella beside them, across the carriers we represent in Arizona, Nevada, Utah and Idaho. If the current carrier's treatment of a new driver is as fair as any, the recommendation is to add the teen there and change only the assignments and the limits.