How Does a Newly Licensed Driver Impact Car Insurance Premiums?

How Does A Newly Licensed Driver Impact Car Insurance Premiums

New Drivers

Do you have a new driver in your household that is about to get their license for the first time? How does a newly licensed driver impact car insurance premiums?  If so, this article is for you. It addresses some of the discounts that may be available, points out some of the important restrictions you should be aware of, addresses the types of vehicles that are most appropriated for newer drivers, and outlines some of the risks that inexperienced operators pose.

Insurance company actuaries set their pricing based upon sophisticated mathematical models that seek to predict the chances of loss for drivers. The chances of loss vary based upon the characteristics of the driver, of the car being driven, and the geography (where the car is being driven).   Newly licensed drivers are much more likely to been involved in crashes due to their inexperience. If they are young as well, immaturity can also contribute to the chances of loss. According to the Insurance Institute For Highway Safety, while teenager drivers drive fewer miles than most drivers, their crash rate per mile driven is about three times that of drivers 20 and older.   For the newest of young drivers, those 16 to 17 years old, the crash rate is almost 4 times that of drivers 20 and older. The Insurance Institute For Highway Safety (IIHS) also points out that vehicular accidents are the leading cause of death for teenagers.

Graduated Licensing Systems:

Because of the dramatically higher accident incident rates for youthful drivers, many states have implemented graduated licensing systems.   The motor vehicle laws in these states generally limit the driving privileges of youthful operators for some period of time.   The restrictions can apply to night time driving, carrying other passengers, cell phone usage, and various other activities.   It is important that you understand the restrictions that may apply in your state. (Click Here to find out more.

Performance Vehicles & Inexperienced Drivers:   A Deadly Combination:

High horsepower, performance vehicles have tremendous power and are not for the inexperienced operator.   When you combine the inexperience of a new driver, the immaturity of a younger individual, and a high performance vehicle, you are asking for trouble.   An IIHS report on incident rates for different types of vehicles shows that the best vehicles for youthful drivers are larger SUV’s.

If you want to show your love for your teenager, don’t do it by buying him or her a high horsepower sports car. Do it by buying him or her a larger, non-performance vehicle with an excellent crash test rating. (Click Here for crash test ratings.) One thing the IIHS report also shows is just how dangerous high performance motorcycles are.   (Click Here To See IIHS report on teen accident rates for different types of vehicles.)

Insurance Is Required:

It is important that you also know that insurance is required in every state except for New Hampshire.   You need to purchase insurance or you may face legal consequences.   For the reasons stated above, insurance on youthful and inexperienced drivers can be very expensive – particularly when they have full time use of a car or the car that they drive is a performance vehicle.

Most insurance companies will not begin charging you for a new driver until that driver actually becomes licensed.   Usually, there is no additional charge for drivers that have a learner/instruction permit. Your insurance company likely has access to a database that tells them all of the licensed drivers in your household. It is important that you call your agent or insurer to make them aware of new drivers as some insurance policies have significant policy restrictions that apply to undisclosed drivers.

These undisclosed driver policy restrictions usually do not apply to just new drivers, so it is important that you tell your agent or insurer about any new drivers.   The most common situation (in addition to a newly licensed driver) is either a child moving back home or a boyfriend/girlfriend that has access to your vehicle.

How Can A Newly Licensed Driver Save On Car Insurance Premiums?   What Discounts May Be Available?

  • Good Student Discount: Often, insurers will offer a discount for drivers who are full-time students when they can provide a recent report card that shows achievement of grades above some qualifying threshold. Generally, these discounts only apply to students 21 years of age or less. As young drivers usually have high rates, good student discounts can often make a big difference in your premium – the good student discount can be 25% or more;
  • Driver Training/Defensive Driver Training: Some insurers offer discounts to drivers who can prove that they took and passed a formal driver training or defensive driver training program. While these discounts are mostly limited to drivers aged 21 and under, some insurers offer discounts to more mature drivers who have recently attended similar training;
  • Type Of Vehicle: As mentioned earlier in this article, the type of vehicle that a new driver has access to can have a dramatic impact on the insurance premium.   If you have multiple cars, or if you are buying a new car for the new driver, try to assign a vehicle to the new driver that is most appropriate.   If you are wondering about options, your insurance agent may be able to provide quotations to you on various types of vehicles. Avoid assigning high performance vehicles to inexperienced operators.
  • Multi-Car Discount: It is usually less expensive to add a child’s insurance to your insurance policy than it is for your child to purchase that coverage on their own. Generally, so long as you own the vehicle and they remain part of your household, you will be able to insure them on your policy. Rules, however, vary by insurer.

To read about other discounts that may be available to you on your auto insurance policy, click here.

This article is just a quick summary of some of the issues surrounding youthful and inexperienced drivers.   It is highly recommended that you seek the counsel of a professional insurance agent to discuss the particulars of your situation and the rules that may apply in your state.   Given the increased risk presented by youthful and inexperienced operators, your independent insurance agent can evaluate offerings from multiple insurers to determine who has the best coverage and pricing solutions for your particular situation.

Other Enhanced Insurance articles related to Insurance Premiums:

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How Does Gender and Age Impact Car Insurance Premiums

How Does Driving Record Impact Car Insurance Premium

How Does Vehicle Location Impact Car Insurance Premium

How Does Theft Risk Impact Car Insurance Premiums?

What Is A Car Insurance Premium

How Does a DUI or DWI Impact Car Insurance Premiums

Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.

While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.

Jim Ketterson is an insurance expert with more than 25 years of experience in the industry. He has served as a President of an insurance company, an insurance underwriter, and has held various roles in insurance company product management. He has his Chartered Property Casualty Underwriter designation and a MBA in Finance. The information he offers in his posts is general in nature and may not be appropriate, accurate, or applicable in all situations. Before making any important insurance decisions, you should seek the advice of a qualified insurance agent and discuss the particulars of your individual situation. Follow Jim on Twitter @MNinsurancePro

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