What to Know About Auto Insurance for Teens
Raleigh parent Mark Schurtman lists it as one of the scariest moments of his life: the day his teenage daughter, JoAnna, asked him to take her out driving. "I literally came home shaking," he says.
Driving is a teen rite of passage. But before you hand over the car keys, do your homework to assure your child will be safe — and properly insured — on the road.
Historically, teens have earned a high-risk reputation behind the wheel. Motor vehicle crashes are the leading cause of death for 15- to 20-year-olds, according to the National Highway Traffic Safety Administration. The UNC Highway Safety Research Center in Chapel Hill reports that in 2008, 197 North Carolina teens were killed in auto accidents, and 18,560 were injured.
Adding a teen driver to your auto insurance policy not only rattles your nerves; it can impact your liability as well as your checkbook.
One of the first questions to consider is how to title a car if your teen will have his or her own, according to Raleigh attorneys Greg Seibert and Jeanne Washburn. In North Carolina, the Family Purpose Doctrine will hold a vehicle's owner liable if the driver is negligent and the car was in use for a family or household purpose.
"'Family purpose' is defined as any time your teen might be out on family business, like stopping at the store for milk. If she is involved in an at-fault accident under those circumstances, you can be held liable," Seibert says. Therefore, it may be best to title your child's car in her name.
You have two options when purchasing auto insurance for your newly licensed driver. You can add the teen to your existing auto policy or help her obtain her own insurance.
According to the North Carolina Department of Insurance, underwriting guidelines, set by individual insurance companies, play a major role in determining insurance cost and coverage. Preferred rate policies are less expensive, and are available to "good risk" drivers. Non-preferred policies are offered to high-risk drivers at higher rates.
Most, if not all, insurance companies require at least three years (some five years) of driving experience to be eligible for preferred rates, according to Lauri Fair, an insurance agent in Raleigh. In addition, the inexperienced operator factor, set by the North Carolina Rate Manual, adds an additional charge to auto insurance policies for drivers with less than three years of experience, and decreases annually. Therefore, from a premium standpoint and for liability reasons, Fair says it is generally better for teens to be on their parents' policy.
How much is enough
The North Carolina Reinsurance Facility was created in 1973 by the North Carolina General Assembly to guarantee that all drivers, regardless of driving record or experience, could purchase 30/60/25 liability coverage, the minimum amount required by state law. This coverage will pay up to $30,000 to any one person injured by a covered driver, or up to $60,000 for all injured parties combined, from a single accident. It also limits property damage to $25,000 per accident.
However, the state-mandated 30/60/25 liability coverage minimum may not be enough, according to Fair. "If your child causes an accident with a Mercedes, for example, the total property damage could easily exceed $25,000," she says. "Parents can usually afford — and need — higher liability coverage to protect themselves and their assets. By including your teen on your policy, you reduce the risk of having insufficient coverage in case of an accident."
Fair discourages parents from buying their teen a new car. "That first car will likely suffer a few bumps, and an older car is more economical to insure while you're waiting out that three-year surcharge period," she says.
In addition, remember that the driving history of all drivers in the household will affect the cost of insurance.
Two families' stories
Schurtman chose to include JoAnna on his auto policy when she got her license in August 2009. "She pays her own premium each month, but she'd be paying much more — and not have as much liability coverage — on her own policy," Schurtman says. "I pray she doesn't get a ticket or have an accident, but if that were to happen, I'd move her onto her own policy and the higher rates would follow her there."
In contrast, Mark and Lynanne Fowle of Holly Springs chose to have their teens purchase their own auto insurance. Among their five children, three have earned driving privileges thus far.
"We believe that having their own insurance builds character and fosters self-reliance, responsibility and pride in doing something on their own. We also wanted to protect our savings and home in case they were sued as a result of an accident," Mark says.
The Fowles' strategy was tested when their 17-year-old daughter, Serena, rear-ended another car as she drove home from work one rainy night. "When the other driver realized she was a teenager, he assumed she was an add-on to her parents' policy, and hired an attorney before he went to the emergency room," Lynanne says.
The driver sued Serena for $70,000-plus in civil court, but the case was settled in mediation for $14,000. "Since Serena had her own, separate policy, we were not held liable and the total payment to the other driver was much lower. As a result, we were all better protected and Serena's insurance rates didn't skyrocket afterwards," Lynanne says.
According to Seibert, North Carolina is "an extremely debtor-friendly state. This makes it difficult, although not impossible, to collect damages beyond the policy of insurance. As a practical matter, teens generally have no assets and, therefore, their exposure is limited," he says. "Funds placed in trust (529s, college savings, etc.) that are owned by the parents, but not controlled by the teen, are not subject to judgments against the teen."
Parents can help their teens avoid tragic outcomes on the road by giving them opportunities to practice, according to William Powell, field manager at Jordan Driving School in Raleigh. "Six hours of behind-the-wheel instruction is not enough time to become a skilled, proficient driver," he says.
Unlike the controlled atmosphere inside a Jordan Driving School vehicle, Powell said being in the car with a parent gives teens their first true driving experience. "By taking your teen out driving, you foster trust between yourself and your child so that, when the time comes, you'll feel confident that your child will know what to do when you're not sitting beside her," he says.
In addition, experts agree that a parent/teen driver contract can be an effective communications tool to use before your teen drives solo. Fair suggests such an agreement to the parents of all new drivers. "It helps to spell out the parents' expectations for their teen to be safe and responsible behind the wheel," she says.
Money is another motivator Fair uses to help teens understand the potential consequences of their actions on the road. "I show them what their rate will be on their parents' policy, and how that rate would change if they were bumped off into a non-preferred policy of their own. Then we factor in the insurance points that would occur for a ticket or an at-fault accident. When they see how those rates rise, it seems to resonate," she says.
Ensure that your teen will be safe and properly insured when she gets behind the wheel. Visit the Web sites listed below or talk to your insurance agent for more information.
Maria J. Mauriello is a freelance writer and communications professional and the mother of two children. She lives in Raleigh.
Resources for Teens and Parents
Visit the following Web sites for information about driving safety and auto insurance:
Allstate Insurance • www.allstate.com/auto-insurance/auto-insurance- for-teens.aspx
Center for the Study of Young Drivers • www.csyd.unc.edu
North Carolina Department of Insurance • www.ncdoi.com
North Carolina Division of Motor Vehicles • www.ncdot.org/dmv
UNC Highway Safety Research Center • www.hsrc.unc.edu
North Carolina's Graduated Licensing Program
Since North Carolina's graduated licensing program went into effect Dec. 1, 1997, fatalities of 16-year-old drivers, from 1997 to 2009, have declined by 38 percent, according to Robert Foss, Ph.D., with the Center for the Study of Young Drivers.
For details about the three levels of the graduated licensing program, visit www.ncdot.org/dmv/driver_services/graduatedlicensing/requirements.html.