Buckle Up: Understanding the Cost of Liability with a Teen Driver

This year’s Resource Consulting Group Women’s Initiative theme explores the financial aspects of creating, raising, and being part of a family. When the teen members of your family are ready to drive, this provides an opportunity to teach them the rules of the road and some of the financial responsibilities of driving.

Beyond buying a car, driving expenses also include fuel and car maintenance. The biggest recurring expense, however, might be the new insurance bill and any liability associated with the teen driver. As young and inexperienced drivers, teenagers are more prone to accidents, and the financial consequences can be significant.

Here, we explore the factors contributing to the cost of liability with a teen driver and discuss ways to reduce auto insurance premiums.

1. Driver’s Education Programs

Not only will a formal driver’s education program provide vital knowledge and skills behind the wheel, but it can also reduce the cost of the insurance premium related to the teen driver. Many insurance companies provide discounts to drivers who have successfully completed these programs. Driver’s education classes can be taken through private lessons, a local high school, or Florida virtual school. Even some county sheriff’s offices offer defensive driving classes.

2. Good Student Discount 

It’s common for auto insurance companies to offer discounts to students who maintain good grades, so ask about possible discounts when enrolling your child. Some insurance companies require that the student submit proof of grades by sending a copy of their report card.

3. Vehicle Choice

The type of vehicle a teen driver operates also affects the cost of liability. Sporty or high-performance vehicles tend to have higher insurance premiums due to their increased risk of accidents and higher repair costs. Instead, choose a car with good safety ratings, advanced safety features, and a smaller engine size. This reduces insurance costs and provides added protection in the event of an accident.

4. Parental Monitoring

Utilizing technology to monitor teen drivers can positively impact liability costs. Many insurance companies offer programs that allow parents to monitor their teen’s driving habits, such as speed, location, and phone usage. This data can be used to provide feedback, help correct risky driving behaviors, and promote safer driving habits. By actively participating in your teen’s driving education and setting clear expectations, parents can help reduce the risk of accidents and associated liabilities.

5. Vehicle Ownership

The liability cost of teen drivers can also be influenced by who holds the title to the car they drive. In general, the person who owns the vehicle and is listed as the titleholder is considered the primary responsible party for any accidents or incidents involving the vehicle. However, the liability cost associated with teen drivers can vary based on the specific insurance policies and laws in place in your jurisdiction.

Suppose a teen driver is listed as the primary driver on the insurance policy and holds the title to the vehicle they are driving. In that case, they will likely be directly responsible for any liability costs resulting from accidents or damages. This cannot happen until the teen is a legal adult, which is dependent on the state and the insurance carrier’s rules. Alternatively, suppose a parent holds the title to the vehicle and adds the teen driver to their insurance policy as an additional driver. In that case, the liability costs might be covered under the parent’s insurance policy. The same goes for young teens driving with a learner’s permit. The parent who signed the authorization for the permit at the DMV can be liable for any costs resulting from an accident with the driver on the learner’s permit.

Keep in mind that even though moving ownership of a vehicle to a younger driver and getting the driver their own auto insurance policy may save insurance premiums, the liability coverage that your family can obtain may be greater if that teen is covered under the family auto insurance policy. 

6. Umbrella Insurance

Having basic auto insurance may not be enough. As a parent of a teen driver, you can be legally and financially responsible for an accident where your teen driver is at fault. This means you could be sued for the actions of your teen driver. An umbrella policy (aka an excess liability insurance policy) is an inexpensive way to add an extra layer of protection for your assets and your family.

If you have an umbrella policy in place, you may wish to confirm that this policy covers all drivers in your household. For example, it may make sense to continue to include your college student on your auto insurance policy so that they can be included on your umbrella coverage. 

While the cost and liability of a teen driver may be a concern for parents, these strategies can help reduce liability costs. Encouraging communication and parental involvement in a teen driver’s journey can also play a significant role in safe driving habits. By prioritizing education, responsible decision-making, and safety, parents can help ensure that their teen drivers navigate the roads confidently and minimize the financial burdens associated with liability.