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If you’re 16 years old, live in California and just passed your driver’s license test, the first thing you should do is drive your family to In-N-Out Burger for a milkshake and some animal-style fries.
The first thing a parent should do is call the insurance company to update the policy. That part, however, will probably give you indigestion.
Last month, when Debbie Mukamal called her insurer as she and her daughter rolled away from an In-N-Out drive-through in their 2018 Subaru, the representative casually informed her that her annual premium would triple, from about $1,700 to over $5,000.
She has it pretty good, it turns out. There are plenty of families with three or four children whose annual premiums will top $20,000 this year. That can be enough to replace one of the cars that the policy covers.
How can this be? It’s the insurance industry, which means it’s complicated, unpredictable and more or less mandatory. Buckle up, since failure to do so can cost you money, and away we go.
A Common Dilemma: Young Drivers Crash Cars
If you were an insurance company, you would charge a lot more for young drivers, too. Consider the most recent data from the National Highway Traffic Safety Administration on young drivers, which it defines as people between the ages of 15 and 20.
Those young people make up 5 percent of licensed drivers but account for 8.1 percent of drivers involved in fatal crashes and 12 percent of those involved in police-reported crashes.
At the time of a fatal accident, a higher percentage of young drivers are speeding than drivers in any other age group are.
And then there are the young men. The rate of young women involved in fatal crashes per 100,000 licensed drivers is 22.74, but it jumps to 58.73 for young men. Insurance premiums generally reflect that. One Long Island father I spoke to this week had three young men in the mix, expensive cars, an accident on the household ledger and a moving violation, too. The family is paying Geico over $25,000 annually.
Ms. Mukamal’s daughter is not getting a break, alas. In California, the state does not allow gender-based pricing. Ms. Mukamal’s insurer, CSAA Insurance Group, would not comment on the details of her policy, citing its “high regard” for privacy, even though she gave the company explicit permission to talk to me about it.
A Common Dilemma: Inflation
As my colleague Tara Siegel Bernard and I discovered last month when we tried — and failed — to shop our policies around for a better deal, inflation was a factor even if you didn’t have young drivers and their cars on your policy.
Motor-vehicle insurance premiums have risen 52 percent in just the last three years, according to the latest data from the Consumer Price Index.
There are many reasons for this. Cars cost more and so do their parts. Additionally, the people who install the parts when drivers smash up their vehicles may be in short supply and command higher wages. Weather-related claims are also increasing, and distracted driving is a risk that only grows as phones are able to do more things.
Unforced Errors: Moving Violations
Leah Carter, a mother of four in Merrick, N.Y., sent me 60 pages of documents that she and her family were trying to make sense of after their annual premium with Travelers Insurance roughly doubled in the space of a year or so, to more than $21,000.
They added a fourth child and a sixth car to their Travelers policy this year. None of the vehicles are fancy. There had been a few moving violations, including at least one that was her husband’s responsibility. Two violations were listed, but based on the policy documents, it wasn’t clear how severe they were.
One violation had a blank spot next to it where the name of the driver should have been, and Ms. Carter thought it was from when one of her children had been pulled over. Travelers listed a $4,030 surcharge for the two violations it had recorded. That amount rose, inexplicably, to over $5,000 on a statement that the family received a few months later.
It can be hard to tease out just how much of any given price hike is related to new drivers and another car coming on to the policy, a Travelers spokesperson said. In the background, there’s inflation as well as any moving violations and other adjustments that a customer may make.
Still, in this case, it appears as if it cost the family thousands of dollars to add their fourth and final child, and one additional car. And that was after they took the big hit for the violations.
Four Things Families Can Do to Save Money
First, ask about any discounts for good grades. Most insurance companies offer them and they may continue through college for young drivers who pursue higher education.
Second, see about enrolling in any available defensive driving courses or similar programs. Ms. Mukamal said her insurer told her she should be able to cut about $1,000 off her $5,000 quote if her daughter successfully completed a course.
Third, for children who are in college far from home and don’t have a car on campus, ask if companies offer any “away at school” discounts. They may not suggest this on their own, so it’s on you to bring it up.
Fourth, consider paying out of pocket instead of making low-dollar claims (or having the young driver pay out of pocket) when it’s feasible. It can be difficult to know how much, if at all, premiums may rise after you report one accident, which is annoying. But you could save money this way.
A Money-Saving Parenting Tip
Let’s say you’re going to pay for your young driver’s first few years of insurance premiums. Consider the tough-love talk that Kevin B. Curtis and his wife gave their two sons when they were newly behind the wheel.
“If they had a traffic violation or an accident that caused the premiums to go up, they would have to pay the difference until they bought their own vehicles,” he said. “They would also be responsible for paying any court fines for traffic infractions.”
As we now know, that amount can easily total well over $1,000 per year. Tell your children that, explicitly.
Once duly informed of their potential responsibilities, Mr. Curtis’s sons were, he said, extremely careful drivers.
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