George Liakakis
For the new driver in your family, getting their driver’s license is probably a thrilling rite of passage. If that new driver is your teenager, things are a little more complicated for you. Getting them licensed might mean you’ll spend less time driving carpool, but even more time worrying about where they are and whether they’re safe. Then there’s the cost: new driver car insurance is not cheap.
But knowing that your new driver can’t get behind the wheel without that coverage (and knowing that new drivers are especially prone to accidents!), it’s essential that you get adequate insurance in place before their first solo drive, no matter the cost. As you think about insurance planning for the new driver in your family, consider these five points—then call your insurance advisor for specific guidance.
1. Insurance planning should start before a new driver is licensed. State laws vary around auto insurance requirements for new drivers. In Massachusetts, drivers don’t have to be covered by a car insurance policy until they’re fully licensed. So if you’re a parent of a new driver, you probably don’t want to add them to your policy until they’re actually about to be licensed so you don’t spend more on premiums than necessary. Coverage just needs to be in place before the first time they get behind the wheel with their license.
It’s common for parents of new drivers to add their kids to their existing auto insurance policies. Even with high new driver car insurance rates (more on that next), this strategy is typically much cheaper than having the driver get their own insurance coverage. Minors also can’t buy their own auto insurance policies in most places. But in your family’s situation, there could be reasons why it makes more sense for the new driver to get separate coverage.
Bottom line: Check in with your insurance advisor once a prospective new driver starts their training so there’s plenty of time to assess all your options and get them covered before the day of the licensing test.
2.There’s no avoiding sticker shock. You can work with your insurance advisors to compare policies and maximize any cost-saving discounts that are available for your family’s situation. But the reality is that paying car insurance new driver rates is probably going to add thousands of dollars a year to your insurance premiums. According to 2019 data from CarInsurance.com, in Massachusetts adding full coverage for a teen driver to an existing policy would increase the average auto insurance premium by 96 percent. Adding a new driver to your existing policy could require you to shift some things around in your budget to free up an additional $2,000 or $3,000+ per year.
3. Now’s a good time to reassess your coverage and deductibles. When was the last time you really looked at your insurance policy? Adding a new driver to your policy gives you an opportunity to assess your current insurance coverage and possibly make adjustments. Maybe in your case it makes sense to raise some of your deductibles to lower your overall premiums. Or, if you’re concerned that your teen driver is going to be prone to fender benders, maybe you want to consider lowering your collision deductible so your out-of-pocket costs are lower if you have to file any claims. Even if you ultimately leave your policy unchanged, reviewing your coverage is a useful refresher.
4. Delivery driving could require extra insurance. Is there any chance your family’s new driver will want to use their new skills to earn some cash as a food delivery driver? What sounds like a fun, flexible weekend job could have expensive insurance implications. Your existing auto insurance policy may not cover any damage that occurs while the car is being used for business purposes. Look into additional coverage for delivery drivers if this kind of job might be in the cards for your new driver.
5. New drivers might need some insurance guidance. New drivers don’t even know what they don’t know about insurance. A teen or young adult who has never had to think about car insurance before can’t be expected to understand the complexities of how it works, even if the topic was covered during their driver training. Some of the things you may need to discuss with a new driver include:
- Letting other people drive. You’ll probably want to urge your new driver not to hand their car keys to friends, even if your auto insurance covers people who aren’t named on your policy (as many policies do, assuming the driver has permission from someone who is on the policy). You don’t want your premiums to go up because someone else had an at-fault accident while driving one of your family’s cars.
- What to do after an accident. Remind the driver to keep a copy of their policy in the car at all times. Talk them through the steps they should take after an accident (i.e., check that everyone’s safe first and the car is out of the road, call 911 if necessary, don’t talk about who’s at fault or what your auto insurance policy provides but do exchange policy numbers and contact information).
- How your driving record affects future insurance costs. Is the new driver in your family aware of the long-term effects of their driving behavior? Make sure they understand that getting speeding tickets and other moving violations can contribute to rate increases on their car insurance in the future, and that having a clean driving record can lead to rate discounts. Even if you’re covering the new driver’s car insurance costs for now, having a bad driving record will lock them into high rates if they eventually buy their own policy.
Have a New Driver in the Family?
Sachetta’s advisors are here to make insurance planning as simple and painless as possible for you and your family. We’ll help you evaluate all your options so you can get what the new driver needs without spending more than necessary. Now can also be a helpful time to visit new and changing financial planning needs. Contact us today.
Georgios Liakakis, CPA, MSA is a Certified Public Accountant and holds a Master’s Degree in Accounting from the University of Massachusetts Lowell. He joined our team in 2016 and focuses on both business and individual taxation.