How Does a New Driver Affect Your Auto Insurance?

If you’re not familiar with the rules of auto insurance, they can be confusing.

For example: How do you know if you need to add someone else onto your auto policy?

Actually, this rule happens to be fairly straight-forward. Generally, if someone is licensed, lives with you, and has regular access to your car, you should add them to your policy. This includes spouses, roommates, teenage children, or any other person living in your home.

It’s when you need to add someone to your insurance that the questions get a little more complex. For instance, how will the new driver affect your insurance? Is your premium going to skyrocket?

At Berry Insurance, we’ve worked through this scenario many times and truth be told, the result is a little different each time. But there are some patterns we’ve noticed. 

Whether it’s a new teen driver, or an adult with an established driving record, we want to prepare you as best we can so you know what to expect when you add a new driver to your policy.

Adding a teen or new driver

Did your child just get a permit? A license? 

You might be wondering how it will affect your insurance, or if you need to make any adjustments. 

Here’s what you need to know:

Child with a permit:

If your child just got your permit it should actually not affect your insurance.

If you have a permitted driver using your car, you will however have an increased chance of your insurance premium increasing since a new driver is more likely to get in an accident.

If a permitted driver gets in an accident in your vehicle, you will be surcharged and your insurance will increase. Once the driver gets their license, the surcharge transfers over to them.

So, while you don’t need to make any changes to your insurance when your child gets a permit, you may still want to let your agent know so you can make sure you have adequate coverage.

With the increased risk, you may want to consider maximizing your coverages, or even obtaining umbrella insurance to ensure you’re prepared for any potential claims. We suggest getting an umbrella policy before your child gets their license, as there is a chance some carriers might have restrictions for new drivers.

For more information on how to handle accidents and claims with permitted drivers, check out this article: What Happens if My Child Gets in an Accident with Their Permit?

Child with a license:

Once your child gets a license, you have 60 days by law to inform your insurance carrier.

In most cases, because an insurance carrier will see a new driver as a greater risk, your insurance premium will increase, sometimes significantly (up to 60% for a two-car family).

However, the amount it increases isn’t always predictable.

There are 4 different ownership scenarios that will affect the cost of car insurance for your newly licensed driver:

• Your child will use your existing car (or someone else’s car) on an occasional basis.
• Your child will use your existing car, and they will be listed as the principal driver.
• You purchase an additional car for your child to use, and they will be listed as the principal driver.
• You have your child buy a car in their name, and require them to purchase car insurance in their name as well.

After your child initially gets their license, the insurance cost should reduce each year. After six years, the driver is no longer considered a new driver, so their experience will not affect your premium.

In most cases, even though the teen driver will raise your insurance premium, it will still be more affordable than if they obtained a policy for themself alone. However, this may not always be the case. Many insurance companies offer new policy discounts that can actually make it a cheaper alternative!

Confused yet?

For a more accurate idea of how the new driver should affect you and what your options are, reach out to your insurance agent.

Adding an adult driver

Whether it be a spouse, partner, roommate, or otherwise, adding an adult driver with driving experience to your insurance policy is a little less predictable than adding a brand new driver.

Depending on the driving record of the person you’re adding, your policy could increase, decrease, or stay roughly the same.

If you add on someone with a poor driving record or of an age the insurance company considers a risk, your premium could increase. On the other hand, if you add a driver with a great driving record, it could actually cause your premium to decrease.

For a more accurate idea of how an adult driver will affect your insurance, reach out to your agent.

Ways to save money after adding a new driver:

So, is adding a new driver to your car insurance policy increasing your premium?

Before you shell out the cash, make sure you’re taking advantage of all the savings opportunities you have.

Bundle policies

If you aren’t already bundling your auto insurance policy with your other personal insurance policies, you should be because it is one of the simplest and most effective ways to save money.

Many insurance companies offer incentives for the more business you provide them. By bundling your car insurance with other policies (such as homeowners/rental) within the same insurance company, you may be able to save approximately 5-25 % on your policies.

Insure more than one car with the same policy or carrier (multi-car discount)

Similar to bundling policies, you can also earn discounts for insuring more than one vehicle in the same household. 

Shop around for rates

Insurance prices differ from company to company, so if you feel like you’re paying a lot for car insurance, you might want to obtain quotes from a few different companies.

Alternatively, you can also save money by maintaining your coverage with your insurance company, as some carriers offer price breaks for longtime customers, so you’ll want to check with your agent to see which option is best for you. 

Pay via EFT/ACH or pay ahead

Paying for your auto insurance through electronic funds transfer (EFT), automated clearing house (ACH), or paying the premium up front can eliminate billing fees.

If you’re comfortable with your payment automatically withdrawing from your bank account each month, or if you can afford to front the premium, these methods can save you both time and money.

Choose a higher deductible plan

Of course, you can also lower your premium by selecting an auto insurance plan with a higher deductible. 

Doing this means you’ll be paying less per month, but will have to pay more if you get in an accident, so if you select a higher-deductible plan, you’ll want to make sure you have enough money set aside in case you need to cover damages from an accident.

Ask your agent about any discounts

Auto insurance policies have several available discounts, and the new driver on your policy may even make you eligible! You can get a discount for doing the following:

• Being a member of an association (such as AAA, AARP, alumni associations, wholesale clubs, military organizations, honor societies, and more)
• Giving to a charity 
• Getting good grades (insurance companies reward both high school and college drivers for earning good grades)
• Being a safe driver (drivers without accidents or violations for a certain period – usually five years – can save hundreds on their insurance through a safe driver or good driver discount)

Ask your agent if you are eligible for any discounts that aren’t already applied to your policy.

Remove Optional Coverages

Many insurance plans include optional coverages intended to provide services in specific scenarios. If these coverages do not apply to you, or if you have another service that provides similar coverage, you should not be paying the extra amount for them.

Collision: 

Collision insurance offers coverage to repair or replace your vehicle if it is damaged in an accident. If your vehicle is older and the value is low enough that you could afford to repair or replace it if it were damaged or destroyed, you may want to remove collision insurance. 

Keep in mind, if you are leasing your vehicle, or if it isn’t paid off, collision coverage is typically required.

Substitute Transportation: 

Substitute transportation insurance will pay for at least a portion of the cost of a rental vehicle if you need one due to a covered loss while it is being repaired or replaced (if you have collision insurance). 

If you have an alternative vehicle you can use, or if you are able to go without your car for a period of time, you could remove substitute transportation.

Roadside/towing:

Many insurance companies offer roadside assistance or towing insurance if your car breaks down on the side of the road and you are unable to get it to a mechanic. If you have both roadside/towing and AAA, you are essentially paying for the same coverage twice, so choose one or the other.

Enroll in telematics

It’s no secret that technology is advancing and infiltrating almost every industry, but did you know it can also help save you money on your car insurance? Through telematics, insurance companies are using tracking devices to monitor driver data including speed, mileage, driving time, hard brakes, and more to determine if you are eligible for a discount.

Pay-as-you-drive insurance models using telematics, such as Drive with Safety or N&Drive through Norfolk & Dedham, monitor driving habits to offer discounts up to 30% to cautious or low-mileage drivers. 

Telematics can not increase your premium. At worst, your premium will stay the same, but you could get a discount.

Make sure your insurance is protecting you and your loved ones 

So now you know (more or less) what to expect when you add a new driver to your car insurance policy. 

You also know some ways to save on insurance if your premium does increase.

But if your insurance is no longer covering just you, you also may want to make sure you have enough insurance to cover all your risks. To learn more read How Much Car Insurance Do I Need? (And Why the State Minimum Isn’t Enough)