When Should I Add a Teen Driver to My Car Insurance Policy?

New Jersey law requires every driver, including first-time teen drivers , to carry a minimum level of liability insurance before they can legally be behind the wheel of a moving vehicle. In the Garden State that can be as early as age 16 or 17. The optimal time to be thinking about automobile insurance coverage for your son or daughter is before this milestone arrives, because there’s more at stake than just meeting minimum coverage requirements.

"Besides ensuring that you and your teen are adhering to the law, it is in your family’s best interests financially to be proactive about his or her insurance coverage," said Harold Soden Jr., an Insurance and Risk Management Advisor with the Oliver L. E. Soden Agency in Jamesburg, an Independent insurance agency. As long as your child is a dependent, you can still be legally responsible (i.e., financially liable) for your child’s actions behind the wheel. In a worst-case scenario in which a damages award against your child is substantial, once insurance is exhausted, your family’s assets such as savings and investments, home(s) and retirement savings, for example, can be at risk to satisfy the award.  

NJ Graduated Drive License Program

In any discussion of car insurance for teen drivers in New Jersey, it helps to understand the state’s Graduated Driver License (GDL) program, which grants first-timer driving privileges in phases:

• At age 16 – your teen may apply for a student driver permit (must be enrolled in a licensed driver’s ed course)
• At age 17 – your teen may apply for an examination permit (enrollment in licensed driver’s ed course not required)
• Starting at age 18 – your teen is eligible to apply for a full license

Auto Insurance for Teens with Driving Permit

Permit holders have a number of meaningful restrictions on their driving privileges such as limits on what hours of the day they can drive, who can and cannot be in the car, and whether they need to be accompanied by a licensed driver over 21 in the passenger seat, for example.

Because these restrictions have been statistically shown to greatly reduce the risks posed by a teen driver, many insurers will extend coverage on parents’ existing automobile insurance policy to their teen driver who has a permit (but not a license) without even charging higher premiums.

But it’s always better to double-check than to assume.  Some insurers do charge a fee for extending coverage. That’s why it pays to shop around for auto policies when it comes to insuring your teen driver — a little more on that later. Even if you know that your policy will extend to your teen, it’s important to formally notify your carrier when there’s a teen driver to ensure coverage in the event of a claim. This is also a good time to check the terms of your existing policy to ensure that your current coverages (liability, collision/comprehensive) and monetary limits will provide adequate protection and make changes if needed.

Add to Parents’ Policy vs. Insure Separately?

Once your teen becomes a licensed driver, your insurer will require you to either formally add him or her to your existing policy or purchase a separate policy to cover your child.

“In almost all cases, it ends up being more economical adding your teen driver to your existing policy,” said Soden. However, many factors come into play and an experienced agent would be able to recognize situations in which it makes sense to get quotes for both options. "There’s no benefit from a legal perspective for purchasing a separate policy either," he added. “In New Jersey, parents may be liable for the actions behind the wheel of their teen driver regardless of whose name the policy is under.”

Minimizing Cost Increases of Insuring a Teen Driver

The fact is, adding any driver to your auto policy will increase your premiums because another driver means a greater potential for accidents. Adding a teenager typically increases rates much more due to the driver’s inexperience and greater statistical likelihood of accidents. From an insurer’s perspective, they are among the riskiest to cover.

Still, there are things that you and your teen driver may be able to do and discounts you may be able to access to minimize the costs, according to Soden. This will vary from insurer to insurer and even among policies written by the same insurer.

Your teen:

• May qualify for a good-student discount, which some insurers give to students (under 25 years old) who maintain at least a B or 3.0 grade-point average. Statistically, good grades equal responsible driving and lower risk.
• May get a better rate for completing an approved driver’s education course. Most teens still take driver's ed in their sophomore or junior year of high school, but it's not required to secure a driver's license in the Garden State. 
• Should drive a vehicle with enhanced safety features, crash protection, and a larger body. From an insurance carrier’s perspective, small cars don’t offer as much protection in crashes, sporty cars may encourage speeding or recklessness, and SUVs and pickup trucks are more difficult to maneuver and more likely to have rollover crashes.
• Should drive a non-luxury vehicle. This, too, can help you get better rates at any age. Luxury brands simply cost more repair/replace.
• Should keep a clean driving record free of accidents and violations. This should be a given for any driver. Accidents and violations cost you and some insurers will raise rates after the first incident.

Parents can:

• Ask about multiple-vehicle auto insurance discounts and multiple insurance policies discounts. Adding another vehicle to a policy that already has at least one vehicle could earn you a discount. Insuring more than one asset—e.g., your car, your home and your boat (sometimes called multi-line insurance) with the same carrier can get you a discount.
• Forgo comprehensive and collision coverage. Unless you lease or owe money on a vehicle, comprehensive and collision coverage generally is optional. So if your teen drives an older model car that isn’t financed, it might make more financial sense to skip these coverage types.
• Ask if you can include your teen driver on your policy as an “occasional” or “pleasure-use only” driver if she or he doesn’t drive often or is away at school without a vehicle to qualify for lower rates.
• Be involved, practice with your teen, keep close oversight. You won’t necessarily qualify for any insurer discounts by doing this, but research shows that teens with more involved parents get fewer tickets and engage in less risky driving. Practicing often with your teen and under varied conditions can help work on weak areas and lead to fewer surprises when you’re no longer in the vehicle with her or him. You may want to create a parent/teen driving agreement to help you set and enforce rules (for car use, passengers, cell phone use, etc.).
• Get technical support. If you’re concerned about your child’s driving practices when you’re not supervising, there are tools and apps that can help you enforce safe driving by monitoring speed or seat belt use; limiting cell phone use, or preventing the car from being driven by someone who’s been using alcohol.

You also may want to look into carrying an umbrella liability policy, said Soden. “For a small additional premium you can have peace of mind knowing that a severe auto accident in which there are serious injuries to other people and extensive damages to property is far less likely to cause you to lose your house and/or other assets you’ve accumulated over the years.”

Consult an Independent Insurance Agent

"Don’t underestimate the value of getting an early start on exploring insurance options for your teen driver," Soden said. If you’re not satisfied with what your current insurer has to offer, you have time to look around for a different policy that best fits your needs and circumstances at the most favorable price.

Independent insurance agents, like Soden, can help you determine what your existing auto insurance policy offers in terms of covering a teen driver, assess what it should cover in order to protect against a worst-case scenario, and help you find the coverage you need at the best price. They work with multiple insurers (45 overall for Soden’s agency), which gives them insight into variations in rate-setting criteria and coverage terms, and helps simplify the insurance shopping process (e.g., applicants need to fill out only one form).