An open letter from Wayne Tully

We have asked hundreds of parents if they understand auto insurance with regards to their teenager and if they comprehend the limits of liability they must bear when they sign for their teen to obtain a license. The following article addresses those issues and has been the subject of many of our radio talk shows. Most parents will add their teenager to the family auto insurance policy after the teenager obtains a junior (or restricted) driver license. There are some auto insurance carriers who will charge insurance for a teen’s instruction permit, however, most will not. If your insurance carrier does charge for coverage on a teen’s instruction permit, this might be a good time for you to look for another carrier. Do you qualify for a discount? Rules vary from state to state and from insurance company to company. I have witnessed insurance discounts from $200.00 to $1,200.00 per year. Discounts could include driver education, good student, good credit, good driving records, Home School Legal Defense Association (HSLDA) discounts, zip code discounts, preferred customer discounts, and changing carrier discounts to name a few. Different carriers give different discounts but the one thing you can count on is this: one of the big ten will beat your present carrier by 25%.

Families seeking to find discounts through their carriers usually hear statements like these:

  • “Let me look into your request”
  • “This driver education program is not on our approved list”
  • “We are giving you the best rate we can at this time”

More than likely, you will not hear that a driver education discount for your new teen driver is designed to repay you for the driver education course you have purchased at the average rate of $10.00 per month. By design, if you enroll in a driver education course for $350.00, your discount will pay for that course in about 35 months (3 years) provided you do not receive any traffic violations or accidents. The typical driver education discount is designed with this formula in mind. If a teen is convicted of a traffic violation or an accident is charged against him, not only is the discount over, the insurance cost for the new driver increases. Some insurance carriers will drop all of your family’s coverage if you receive multiple traffic violations or accidents. If your parents cover your insurance cost and have signed an affidavit of liability at your local driver license office or state DMV, DPS, or DVM, please consider the following: You have agreed and accepted responsibility to pay all costs including legal fees for any vehicle crash or accident caused by the new driver. After the deductible, most of this cost is covered by your insurance policy. If you caused the crash due to negligence and someone is killed, you probably do not have enough insurance to cover the liability. This could be a result of speeding, running a traffic light (or stop sign), driving under the influence of a controlled substance, or even allowing a friend to drive the car just one time. The average family coverage is $100,000 to $500,000 of comprehensive. A fatal crash (whether directly or indirectly your fault) could exceed your family insurance limits and your home could be the source of payment. Be aware, your insurance agent will explain to you that homeowners insurance will not carry over to your auto. Furthermore, the cost could exceed your auto coverage and the value of your home. It could reach into your parent’s income for years to come. This is a very serious commitment your family is about to make. An auto umbrella policy might be an option that could reduce the monthly cost of the new driver’s premium. I recommend that you shop around for an umbrella policy that is cost effective. Ask about an umbrella policy for your family and new teen driver. Policies can include $250,000, $500,000 and $1,000,000. The average cost for a $1,000,000 policy is about $350.00 per year. This is a great investment and protection for any family with a new driver, including my own.

The next time someone asks your parents “are you concerned about your teens driving?” They can reply, “I wouldn’t bet the family farm on it.” Most families do, and they don’t even know it. We have included a rate comparison worksheet to assist you in your research. If your carrier asks about this driver education program, please direct them to our web site and let them read the research completed about this program. Together we are “Creating a family of safe drivers for life”. We recommend that you first call your family’s insurance agent and conduct the Insurance Agent Interview activity, then try the rate comparison. Your agent can answer questions about shopping for insurance and you will not have to provide any information you are uncomfortable giving. The project is most valuable if you can get information from other companies as well, but some companies may not be willing to participate. It is our hope that, by talking to the friendly voice of an expert, you will feel more confident talking to other insurance agents, and will know the right questions to ask. The next section examines different insurance terms to help you understand what kinds of insurance are available. If you cause a collision, you may be responsible for the losses of the other people involved such as: • Medical and funeral costs, lost wages, and compensation for pain and suffering • Car repair or replacement costs and auto rental • Punitive damages awarded by a court • Attorney fees, if owner is sued If you don’t have insurance, anything of value you own may be taken to pay for these losses. If you have insurance, the insurance company will pay amounts for which you are legally responsible, up to your policy’s type and dollar limits.