Car Insurance

When a teenager gets a first car, the event is a big rite of passage. For parents, the event can amount to a big passage of money to pay for the new driver’s insurance.

Right off the bat, get ready to shell out some big bucks. Auto insurance for a teen driver generally costs from 50 percent to 300 percent more than what an older driver with several years of safe driving experience pays, according to the Independent Insurance Agents of America.

But there are steps parents can take to help cushion the cost, which can run hundreds of dollars higher than their own auto insurance premiums.

“Yeah, it’s a big investment,” Willie Yee, an Orinda resident, said with a resigned sigh.

In March, he purchased a AAA of Northern California auto insurance policy for his 17-year-old son Darren. But Yee was able to save money because Darren qualified for a good student discount, which requires at least a “B” average.

“Even then, it’s very expensive,” said Yee. “The cost of insurance is what we expected, even with this discount. Everyone knows it costs more to insure a teenager.”

The main reason it costs more is that teen drivers have no previous driving records that insurers can use to help determine a premium, according to state Department of Insurance spokeswoman Nanci Kramer.

Another reason is that teens have the highest accident rate of any age group in California. While drivers between the ages of 15 and 19 years accounted for 4.1 percent of licensed drivers in the state, teen drivers were responsible for 9.4 percent of fatal collisions and 10.2 percent of injury collisions, according to a 2000 report by the California Highway Patrol.

Typically, at around age 21 and then again at 25, insurance rates drop dramatically for good drivers, said Kramer. Such drivers are defined as those who haven’t gotten a moving violation or been in an accident for three years.

Under state rules governing insur-

ance, companies can — but aren’t required to — offer a discount for licensed drivers with at least a “B” average in high school or college, provided their driving record is free of accidents or moving violations. Some companies offer a discount for students who have passed a driving class, whether in high school or through private lessons.

“It pays to shop around,” said Kramer. “The key is to ask what discounts are available.”

For example, AAA offers as much as a 10 percent good student discount, 21st Century Insurance has a 10 to 15 percent discount, and State Farm Insurance a 7 to 26 percent discount. However, none of these offer a discount for taking a driving class.

Fireman’s Fund Insurance offers a 2 percent discount for taking a driving class and a 10 percent good student discount. And Farmers Insurance offers a 20 percent good-student discount and a 19 to 31 percent for driving school.

Many insurance companies offer a multivehicle discount for cars insured under one policy.

Some insurers, such as AAA of Northern California, require a teen’s car to be registered in a parent’s name or have the car registered in both the teen’s and parents’ names before an insurance policy is issued for the teen driver. Others, such as 21st Century, will provide coverage on a car registered in the teen’s name as long as it’s insured under the parent’s policy.

“If you go under the family plan, it will cost less than if the teen goes out on his own and tries to get a policy,” said Omar Morales, spokesman for the Insurance Information Network of California.

While discounts can help bring down the price of a teen’s policy, other factors also can play a role in setting the price of any premium no matter how old the driver is. The type of vehicle, along with the distance that the car will be driven on a daily basis, are among several factors insurance companies use to set premiums.

For example, Yee’s son drives a 1992 Honda Accord, a car that’s going to cost less to insure than a high-performance sports car.

“Choosing a safe, more sensible car for a teen may not be the sexiest choice, but it is a smart choice,” Morales said. “It could even mean lower auto insurance costs.”

Besides taking advantage of discounts, there are other ways to reduce premiums.

“A lot of things you should try to do to cut down on the bill for teens are the same things that can help you in general with insurance,” said Jenny Mack, spokeswoman for AAA of Northern California. “Choose a low-problem car.”

Increasing a policy’s $250 deductible for collision and comprehensive coverage up to $500 or $1,000 can save 10 percent or more off premiums, according to the Independent Insurance Agents of America. Let the teen driver know how much the insurance costs, the group advises, and have him or her pay all or some of the premium.

Being smart about insurance isn’t all about saving money on premiums.

One thing to consider, said Dan Cohen, spokesman for 21st Century Insurance, is to increase the deductible and use the savings to provide more liability for medical and property damage.